Lumber Futures Spike as Demand for Commodities Increases

Investors are piling into any commodity they can get their hands on as the dollar crumbles and real assets spike. A cautious reading on homebuilder sentiment did not deter traders from bidding lumber limit up for the second day in a row. A vicious combination of short covering, market optimism and demand for commodities is driving lumber prices higher. Curt Cunningham, president of Pacific Futures Trading attributes the buying to inventory restocking and funds that are scrambling to get their hands on one of the few commodities that just a few weeks ago was not at a 52 week high. That was remedied in a matter of three trading days:

“Funds have been buying gold, crude oil and whatever and there just seems to be a consensus that the weaker U.S. dollar means that you need to be long commodities. General consensus is there’s not much wood in the wholesale distribution pipeline and that has left guys scrambling for product.”

Housing data has not been particularly strong of late, but restocking heading into a weak seasonal period could be a sign of better times to come for the housing market. On the other hand, as we’ve seen with many markets it’s difficult to decipher what is real recovery based demand and Fed induced liquidity buying. For now, it’s safe to assume it’s a bit of both.

Comments

[herbert hoover]

yeah because homebuilders are all primed to take off, right? And Bernanke says that there are no bubbles... this cannot end well

2009 Nov 18 04:32 PM

[Mad Hedge Fund Trader]

dfu Sometimes I think I’m the only guy who follows lumber futures because they are such a great “tell” on the direction of wide swaths of the economy. Today, I’m not alone. Chart watchers have gone apoplectic because they think the five year downtrend for this most unloved of commodities was broken yesterday with an impressive limit up move. (see my April call to buy this aromatic commodity by clicking here at www.madhedgefundtrader... ). The move is telling us that either (a) new home construction is slowly reviving, (b) the Chinese have stepped up their buying of natural resources, (c) hard asset investors are rotating into the laggards after running up everything else, (d) the economy is recovering faster than we realize, or (e) all of the above. Better take a look at top lumber producers Weyerhaeuser (WY) and Louisiana Pacific (LPX). If you want to know how to get involved in the futures, please email me at madhedgefundtrader@yah...

2009 Nov 18 05:15 PM

[pockyclips 2020]

Bubble bath. Buy into the bubble, and take a bath!

2009 Nov 19 07:58 AM