LEONARD LUMBER REPORT: The futures market dug itself out of the hole last week

The futures market dug itself out of the hole last week with a little help from the funds. The start of the roll slowed the computer selling, allowing the futures market to breathe. At 13%, the market was going to correct, it just needed a nudge.

On Friday, the final count for fund shorts hit 5,000. That was pre-roll. The funds did about 2,000 spreads last week, so there is more to go.

Please remember that the buying of the front month and selling of the second month is not a guaranteed rally. It just hit at the right time.

Looking at the trade on Thursday and Friday, we saw the selling become more vigorous. Open interest increased on Friday, confirming additional computer selling. The industry is not getting ready to buy anytime soon.

The next factor we have to worry about is the EFP market and whether there is any value there.

There was another dustup in the Jackie Gleason/Art Carney relationship. Needless to say, like wars, fires, and duties, unless it hits at the low, no one cares.

I was hoping that the funds would buy back some of the positions outright. That hasn’t been the case yet. The good news is that some cash items have stopped going down. It is back to a grind. 

Technical:

Sept futures cleared through most of the noise early in the week only to fall back into the middle by late Friday. With 5,700 industry longs, creating upside momentum is difficult. Having at least 80% of those longs offside also limits buying.

The market keeps developing wedge patterns, usually a sign of a sideways market. Today, the key support and resistance points are 582.00 and 567.50.