LEONARD LUMBER REPORT: It’s a Christmas rally

Recap:

It’s a Christmas rally. January futures rose for every session last week, totaling a $20 gain. The cash market saw the deals dry up, and actual tightness forming. It has been heading in that direction for about two weeks, but it only caught the buy late last week. Two opposing forces dominate today’s market. First is the large premium futures hold over the cash market, keeping most buyers on the sidelines. The second is the expectation that there will be less wood available on January 1st than there is today. Maybe that won’t turn out to be true, but it makes those needing a few things uneasy. These are the factors in play today. For now, last week’s trade served more as relief for an oversold market. This week, the focus shifts to decreasing supply and a sizable commercial fund short position.

Looking at a broader picture, the housing market has been slowing since mid-2023. The first half of 2023 was strong, but demand has gradually cooled since then. The raw data doesn’t show a huge slowdown, but there has been a noticeable shift away from typical purchasing patterns. As one trader said, “Everyone just bought a house.” The slowdown is partly due to the uptick in the ‘lost generation’ finally buying homes, and partly because many are married to the 3% mortgage they hold. The industry is influenced by psychological and financial factors. We’re likely to see more of the same moving into 2026. Those are the factors today. For now, last week’s trade was more of a relief value for an oversold market. This week, the focus will be on the decrease in supply and a rather large commercial fund short position.

Technical:

The tech read continues to be a close over the 563.50 could set up for an easy push to the 582.00 area. All the resistance sits in the low 560’s. Close over that area, and there is little to slow the market until the last highs and an 80% RSI. It currently sits at 60.30% in January. It will be nice to talk about an overbought market. but let’s get there first.

Holidays:

24th. Close at 12:05

25^th Closed

26^th All Day Trading

31^st All Day Trading

1^st Closed

2^nd All Day Trading

Daily Bulletin:

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

Southern Yellow Pine:

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/southern-yellow-pine.volume.html

The Commitment of Traders:

https://www.cftc.gov/dea/futures/other_lf.htm