Interesting Level In Lumber

JC Parets
September 25, 2020

From the desk of Tom Bruni @BruniCharting

About a month ago, I discussed the historic rally in Lumber during episode four of "What The FICC?"

One of the primary focuses was the historic rate of change since the March lows and the historical data that suggested forward returns are worse than average following these types of readings.

Since then we've seen prices collapse over 40% and they're now pulling back to an interesting potential support level near 460. Notice how the 200-day moving average is still rising and momentum (albeit recently oversold) is trying to stabilize above 30.

Click on the chart to enlarge view.

The point being, if there was ever a level for Lumber to regain its traction and start to move higher again...this would be it.

If however, prices get below 460, then we're back in a messy long-term range and any edge from a trend perspective will have been eliminated.

Even if you're not trading Lumber, you still want to be paying attention here. We look at this as another barometer of the "reflation and cyclical asset" trade we discussed yesterday on the blog.

So if you're trading any risk assets (especially those like Homebuilding stocks that have a strong positive or negative correlation), Lumber and its performance going forward need to be on your radar.

As always, thanks for reading, and please let us know if you have any questions!

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