LEONARD LUMBER REPORT: January gained $10 for the week, but it felt much better than that
Happy Veterans Day!
One of our own, a World War II veteran, is celebrating this weekend. I believe he was in the Army-Aircorp and served with the French underground. Jack Hall from Hall Lumber Sales in Middleton, Wis, is 99 years old. If you are wondering what he likes, he is a big proponent of owning more precious metals and less cash.
Happy Veterans Day to all who served!
Recap:
January gained $10 for the week, but it felt much better than that. Momentum is getting created just by the fact that sentiment is less bad. While the upside is limited to fund liquidating, there is still that positive note. If you look at open interest, it is apparent that the market is up because of liquidation. Cash, on the other hand, is testing the market’s ability to accept higher prices. The mills still don’t have pricing power back. It gets the win here solely because of how underbought the market has become. If the starts number comes in around 1.4 on Friday, this market will be undersupplied after all the Christmas shutdowns. If it comes in closer to 1.3, then the shutdowns won’t have an effect. That is a general assumption because of the report’s vagueness, but sticking with the dot plots is meaningful.
In 2024, there is less chance of a debacle in employment. The prospective buyers have gone into the weeds with rising rates and primary home prices. They have not gone away, and numbers are growing. That is the main support for holding prices up. There will be spikes up and down in the futures market, but the general economics is that these levels work. Turn demand up some and we are off. Keep demand at its current levels, and it is then more of the same.
Technical:
The technical picture has been very informational for this last run. It is now pushing its limit on a market that is only filling in. This week, November is expiring. The chart pattern in Jan could begin to top and slowly roll over by the end of the week.
If the funds show up, I’m wrong.
Daily Bulletin:
https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf
The Commitment of Traders:
https://www.cftc.gov/dea/futures/other_lf.htm
About the Leonard Report:
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Brian Leonard
312-761-2636