The Leonard Lumber Report: A Quiet Holiday-Shortened Week



The Leonard Lumber Report: A Quiet Holiday-Shortened Week

It was a quiet holiday-shortened week with the roll being the feature. The market broke $100 and rallied back $60 by the end of the session Thursday. All said the weakness in the market was only via futures, and the cash market held steady or gained for the week. 

The Christmas holiday keeps giving. Next week there are more holidays to contend with — that’s why we saw the big push before the Christmas week. The question is if the push was sufficient for a while or not. Surprisingly, the cash market demand remained in place last week, so this thing could be off to the races again once the holidays are over. It looks like the aggressive cash buying is to keep the flow going. That will start to ease at some point, but it’s a positive for today.

Let’s Get Technical:

To keep it simple, the market left a gap last week between 990.20 and 979.30. With another quiet week in front of us, we would look for a test of that area. The one caveat is that lumber is famous for leaving a gap partially filled. If that is the case, the 61.70% RSI gives the market a lot of room to go back to the $1,200 area. There are two possibilities next week. Either it back and fills the gap and then trades sideways, or it off to the races dragging cash up with it.

Weekly Round-Up: 

The entire market psyche is one of a trade that is range-bound and manageable. This one isn’t ready for that, and it feels like setting itself up for another run-up. Cash is still king but hedging up here is a must. 

Open Interest and Commitment of Traders:

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

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

About The Leonard Report

The Leonard Lumber Report is a new 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.

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