Lumber, Monthly Chart Quintuple Top Review

Recently, analysts are all excited about the shortages of lumber.  Due to the forest fires, fear of a duty on Canadian lumber exports, and hurricane Harvey, they claim we are heading into a shortage.

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When we look at the chart above, we can see that lumber prices are approaching $500 per 1000 board feet.

Contract Specifications:

  • Symbol – LS
  • Name – Lumber (LBS)
  • Exchange – CME
  • Trading Months – FHKNUX
  • Trading Unit – 110,000 board foot
  • Tick Size – 10 cents per thousand board feet ($11.00 per contract)
  • Daily Limit – $10.00 per thousand board feet above or below the previous day’s settlement price
  • Trading Hours – 9:00a.m. – 4:00p.m. Mon-Thur, 5:00p.m. – 1:55p.m. Fri CST
  • Last Trading Day – Business day immediately preceding the 16th calendar day of the contract month
  • Value of one futures unit – $110
  • Value of one options unit – $110

Without a doubt the entire lumber market is related to the diagonal world, where impulse wave counting is no help at all. No way is this wave count perfect as it is just a rough start of one.  It can take years and years to build a decent wave count, and many will never tackle such an insane pattern in the first place.

Ok, we have a massive top? If this fundamental shortage is going to continue then lumber would have to initiate an upside breakout, and keep soaring.  Well, we could also be heading right into severe resistance,  and lumber prices could implode right along with other stock markets.  I tend to believe the huge resistance line is going to be a tough barrier to crack,  and nothing can really help except that markets can and do behave the opposite of the fundamentals.

This is where the Lumber COT reports can help, if they are extreme enough in their net long, or net short positions.

This is what the traders’ commitments show us as of Friday. Commercials are net short lumber by a ratio of 3.85:1 while the non-commercial traders are net long by a ratio of 2.0:1. There is nothing balanced in these ratios, especially from the commercial trader’s perspective.

With winter coming on, demand for winter building could drop unexpectedly in the next few months.

When stock markets dipped in 2009 and again in 2015, lumber prices in general followed along, which suggests lumber prices can crash again, in sympathy with the stock markets.