Lumber futures are one soft commodity that investors may want to keep on the radar over the next several months. The November-2017 contract expires in two weeks and rolls over into the January-2018 contract. (Note that if trading lumber futures is not exactly your cup of tea in terms of investment experience or risk exposure, then for an alternative consider Guggenheim’s MSCI Global Timber exchange traded fund: CUT, which is covered regularly along with other natural resources funds in Hillbent-4-ETF’s monthly and quarterly decision support research. CUT has a management expense ratio @ 0.52% and currently yields a 1.68% dividend return.)
The Gulf region’s hurricanes combined with California’s recent wildfires has wrought billions of dollars of property damage and destruction. The rapid increase in the price of lumber futures is correlated to both of these natural disasters. Add to this equation duties imposed on Canadian exports, such as lumber, by the Trump administration and the underlying fundamentals supporting increased prices become even stronger.
So, that’s the rear view mirror of the lumber market. However, what concerns me more is its market direction going forward. Technically, it has broken out above key resistance levels and approaching a key historical resistance level. Below is a monthly chart which depicts a consistent series of market corrections whenever lumber approaches historically high levels. I am not calling for an outright short on the softs’ commodity yet, but, given these lofty levels and the fact that we are coming into the seasonally slower winter season for builders, demand should taper off and favor more the probability of bearish price action.
- Will Lumber Prices Surge in Hurricane’s Wake?
- Soaring Lumber Prices a Problem for Home Builders, Buyers
- Department of Natural Resources: Economic and Revenue Forecast
Hillbent does provide individualized market advice. The information we publish regards securities in which we believe our readers may be interested and our reports reflect our sincere opinions. Nevertheless, they are not intended to be personalized recommendations to buy, hold, or sell securities. Investments in the securities markets, and especially in options or futures, involve substantial risk. It is recommended that you seek personal advice from your professional investment advisor and conduct further independent due diligence research before acting on information published in our reports or blog posts. Most of our information is derived directly from information published by the companies on which we report and/or from other sources we deem to be reliable, without our independent verification. Therefore, we cannot assure the completeness or accuracy of information contained within these reports and we do not in any way warrant or guarantee the success of any action which you take in reliance on our statements. Hillbent.com or its affiliates may own positions in equities mentioned in our reports. We do not receive any compensation from any of the companies or sponsors of securities covered in our reports.