Lumber reached a peak..was it obvious what will happen next?Lumber has reached a peak, after weeks of flirting with all time high territory.
Lumber
Powerful chart: Lumber vs SPYMOnthly Lumber futures LB1! vs SPY
Looks to me like the last 7 times there has been a major trend line break in lumber futures it was a harbinger of what was to come in stocks. Worth keeping an eye on it.
PS: for the few folks out there who like EWT it suggests to me we have one last 5 wave up in lumbar to 55 then the sh=t hits the fan.
Double Top Formation in Lumber FuturesLooking at the charts for Lumber Futures, I was originally upset that I missed the absolutely insane rally in Lumber going back to the start of 2016. However, no use in getting pissed about the past, let's focus on the present. Lumber just formed a double top with price around 400 going back to 2013.
I am waiting for confirmation of a bearish reaction to the double top, and if it does, would short it right below 385 (most recent support level). If it falls below 385, I would look to take profits at the 340 level. I would hold on to some of the position at that level because 340 presents another layer of support. At this level, it could either bounce on support, or breakdown through it. Would put my stop losses around 355 to protect from a bounce off support.
Anything below 355 should be long term trending bearish and would recommend riding profits while moving your stops down along with your position.
Would love to have a differing opinion to bounce ideas off of on this trade.
All the best,
Brandon
Lumber: Potential top spottedLumber futures appear to have topped against a massive monthly mode.
You can go short with stops above the highs to be safe, target a retest of the uptrend mode from the lows.
I overlaid EURUSD and USOIL so you can compare the price action. It's clear we're witneseeing a major dollar rally here. I wouldn't discard its significance. If you're not in any of my recent suggested trades, try to catch this and USDCAD, even buying at market now is viable with stops under yesterday's low. See related ideas for an entry we can take in oil.
If interested in my trading signals, or in personal tuition, contact me privately. I'm offering a considerable discount on a packaged course which includes access to my private trading signals list for a year.
Cheers,
Ivan Labrie.
Link to Tim West's chatroom: www.tradingview.com
We discuss setups like this often there. Feel free to stop by and subscribe to his indicator pack. If you have any questions ask.
Lumber is Sinking – Is Housing Next?Earlier this month, the idea of lumber being a signal for economic data was brought to the table (here). Lumber is not necessarily a trader’s first go-to for evaluating economic forecasts, but there is a striking resemblance in trend for lumber and the ISM manufacturing PMI data. As lumber prices dive, manufacturing data tends to do the same (and vice versa). Lumber, reasonably so, is also correlated to housing; and the US cannot have a recovery without housing participating.
The housing data over the last few years has been lackluster, and today’s data is no exception. Housing starts contracted a whopping 17 percent. That’s 14.5 percent lower than general forecasts. Weather was cold, and it is always to blame.
However, analysts were already discounting the weather issue. Wall Street’s best and brightest were looking for a drop of only 2.5 percent, so clearly it is not just the weather. According to the US Department of Housing and Urban Development, privately-owned housing starts were seasonally-adjusted at an annual rate of 897,000, or 17 percent below the revised January estimate. Single-family housing starts in February were at a seasonally-adjusted annual rate of 697,000, or 14.9 percent below the revised January estimate. Not good.
Housing completions of privately-owned housing fell came in at a seasonally-adjusted annual rate of 850,000, or 13.8 percent below the revised January estimate of 986,000.
The “recovery” bulls will harp on the permits data which was three percent higher than the general consensus. But, let’s be objective. Permits do not particularly matter much because builders cannot sell permits. Building permits are also cyclical. They tend to rise to elevated levels on optimistic outlooks but then completely collapse right be for the next recession. Permits could continue to rise, but it is not indicative of a healthy housing sector, or economy for that matter.
umber has closed well-below the massive ascending channel created when prices bottomed in 2009. Currently trading at $270.90, lumber prices are down almost 14 percent since first bring more attention to lumber a month ago. The basic assumption is that low prices are great for builders and the housing sector in general, and they are at the margin. However, a trend shift in prices indicate that homebuilders are not purchasing lumber. Homebuilder confidence fell for a third consecutive month in March.
Prices saw a bit of support at $265 but could easily hit $245 on trend continuation. To illustrate the correlation of lumber to housing, check out lumber prices relative to the iShares DJ Home Construction ETF (ITB) and the SPDR S&P Homebuilders ETF (XHB). It’s not a perfect match, but it grasps the overall trend quite well. Notice the prices of lumber, ITB, XHB leading into the housing crisis – they collapsed. This time should be no different.
The two popular ETFs now trade at a premium to lumber prices, but the upward trajectory is stalling; and this is far likely contributed to Fed-induced buying (similar to the XLE and future prices). It is only a matter of time before housing ETFs begin to rollover, too.
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Is Lumber Signalling Bad News for US Manufacturing?Lumber is highly correlated to the ISM manufacturing index (or vice versa?). Nevertheless, the weakness in lumber prices is corresponding with the softening manufacturing data, although manufacturing data from Markit suggest manufacturing is weaker than ISM reports. New orders index collapsed from Nov/Dec 66 to 57. Prices have noticeably declined, too.
Anyways, price action is nestled so snugly on price action support at $310.XX, while support was found on the uptrend channel support. This also aligned with a small asymmetrical triangle.
A close below these levels, prices are likely to sell-off to $278, while $268 remains a possibility on weakening economic data.
However, a rally from these levels could push prices to $326.
