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Lumber

Will Lumber Futures Shore Up the Stock Market Rally?Traders: Track a September contract breakout above 494.5. A decisive close above that level sets a rough target of 600 (shelf of former highs from last year). I’ll pass since I don’t trade lumber. (I like the bullish divergence forming on the 14-day RSI, though.) Whether you trade the futures contract or not, a rally for lumber is a rally for homebuilders and the broader stock market. Stay tuned for further bull market confirmation from the commodity space.
PEPPERSTONE:LUMBERLong
by USDSZL
LOEWS, ARE WE ABOUT TO SEE A LIMBO WORLD RECORD? (EARNINGS)And do you want to buy the dip These trends are not looking good. if earnings can't get over 74 and maintain good momentum, it's going to get pushed down to the support trends. Which are quite strong overall. The downside is huge. But it's not like there isn't upside. I'm just not certain the upside to 80 will occur sooner rather than later. Personally, I see a bearish looking stock, but I'm also not as confident as I sometimes am because there is a possibility it holds support at 69 and really starts to move. However, I'm fairly certain we'll see $20 at some point within the next year or two. IMO, sooner. Attaching CAT and APD
NYSE:LShort
by nicktussing77
New Floors with Lumber Liquidators LL commodities retail rally“Inequality can be done away with only by establishing a new society, where men and women will enjoy equal rights, resulting from an upheaval in the means of production and in all social relations. Thus, the status of women will improve only with the elimination of the system that exploits them.” Lumber Liquidators looks good for a reversal. Small share float, strong sales, strong P/B P/E P/C and near zero debt vs equity. Risks: Value Trap, Discretionary spending retraction, macro momentum stays negative
LLong
by noam_chom
5
Lumber and 30 year MortgageLumber and 30 year Mortgage – weekly scale: FRED 30 year rates lag most mortgage rates already above 5%. It has been since 2018 since rates were above 5% and lumber was sub 300.00. High priced lumber (any high priced commodity) will eventually correct itself. High prices cure high prices. Now the pinch is on and rates are reacting. Cost of money is no longer viewed as cheap. This could/should accelerate the cause and effect of high prices cure high prices. Support for lumber is the 800-820 area. Below look for the trend to remain down with continued support at 600 and the 460 area. Risk is 360-380
L
by mtb1980
Copper & Stocks DivergingCopper and S&P500 is making a divergence. Could this mean that we are going to be seeing weakness creep into the real estate market with Lumber and copper falling recently? SPY has tracked copper closely with the rise & fall in inflation and yields. The most used commodity in the world should provide pivotal insights into the next turn in the market. If we do enter disinflation/deflation that's typically not positive for equties despite the "soft landing" narrative.
CAPITALCOM:COPPER
by Trading-Capital
Do you Hear Lumber Screaming?Lumber is at a critical inflection point. Its likely telling us that Central bank policy is about to experience more inflation if they start to ease to soon. If Lumber continues to rally, its screaming more housing inflation could be around the corner. Since we have a major Technical Topping formation in play, Lumber is still vulnerable to more downside which could also mean the housing market has much softer prices ahead. If lumber is to show nay chance of negating this bearish pattern it needs to close above the yellow trendline for 2 consecutive weeks.
L
by Trading-Capital
Housing & Lumber Says SPX to New ATHLumber is a leading indicator for the housing market which is a leading indicator for the economy. In fact, as you can see on the chart, they are usually TOO leading. Housing Index needs lumber to confirm down trend via at least one failed retest of its ATH before it can establish its own top. After housing peaks, It takes a while before the stock market peaks, except during black swan events like Covid of course. But anyone hoping for a black swan event to tank the markets is relying far more on Prayers & Doomium than data.
SP:SPXLong
by Indotermes
Is the selloff over?We wouldn’t blame you if you mistook the lumber price chart with a cryptocurrency. Down more than 70% from its peak in May 2021, lumber’s had astonishing volatility over the past few years. On a longer-term chart, the 460 handle represents a very long-term support/resistance level. With current Lumber prices just shy of this major support level of 460, could we see a breakout higher? Previous 2 attempts to break this level were rejected sharply and a huge rally ensued. Additionally, current RSI readings indicate oversold levels which have been useful in picking the past few bottoms. Overall, we think that lumber could be primed for a move up as it edges closer to the major long-term support level. Entry at 475, stops at 435. Target at 630. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
LLong
by inspirante
Less Liquidity In Summer Months Could Lead To More VolatilityThe Memorial Day weekend is the start of the summer season. In many markets, seasonal factors can impact prices. The old saying, “sell in May and go away,” may not be applicable in the stock market as stocks have been on a rocky path lower in 2022. In commodities, gasoline, meats, grains, and other raw material prices often increase as demand peaks. Heating oil and other winter commodities often move to the downside. However, 2022 is anything but an ordinary year in markets. Thin markets are more volatile than liquid markets Market participants are tired and frustrated in 2022 Lockdowns over the past years could lead to extended summer vacations Lots of head-fake moves on the horizon Expect the unexpected- Volatility leads to opportunity Over the past two years, the global pandemic distorted prices. Stocks rose as artificially low interest rates made the stock market the only alternative with fixed income yields at historical lows. Rates are rising in 2022, with a hawkish Fed and falling bond market. Supply chain bottlenecks continue to plague commodities, and the war in Ukraine has only exacerbated pricing and availability issues. Mid-term elections in the US, and a Presidential contest in Brazil, a leading commodity-producing country, are on the horizon later this year. The geopolitical bifurcation between nuclear powers is another issue facing markets that reflect the economic and geopolitical landscapes. Market participants are exhausted as 2022 has brought a new set of concerns. We could see liquidity in markets dry up over the coming weeks and months as the summer has arrived, and vacations will limit participation in markets across all asset classes. Thin markets are more volatile than liquid markets Liquidity is a critical ingredient for smooth-running markets. Liquidity tends to reduce price variance as more market participants increase buying and selling interests at various levels. Commodities tend to be more volatile than other assets, sans cryptocurrencies, but some raw material markets experience far more volatility than others. Lumber and crude oil are two highly volatile commodities, but one has minimal liquidity while the other experiences far more participation. The daily chart of CME lumber futures shows that daily volume tends to be well below 500 contracts. Open interest at 2,293 contracts makes lumber an illiquid market. Daily historical volatility at over 62% is a function of the lack of volume and open interest, leading to price gaps and limit-up and limit-down price moves where buying disappears during bearish periods and selling evaporates when the price moves higher. Meanwhile, on a typical trading session, NYMEX crude oil futures trade well over 400,000 contracts, with open interest at above 1.81 million contracts on June 2. Daily historical volatility at below 20% reflects that the highly liquid oil market has buyers and sellers at all price levels. The bid-offer spreads in liquid markets are far tighter than in illiquid markets. As liquidity declines, markets tend to experience far more price variance. Market participants are tired and frustrated in 2022 In early 2022, market participants were breathing sighs of relief as the global pandemic was beginning to fade in the rearview mirror. Health concerns may have declined, but financial woes increased with prices. Monetary and fiscal policies planted inflationary seeds that have caused prices to explode higher, while supply chain bottlenecks continue to exacerbate inflationary pressures. Meanwhile, the Russian invasion of Ukraine is another crisis following on the heels of two years of pandemic panic. Sanctions and Russian retaliation exacerbate inflation. Moreover, Russia’s “no-limits” cooperation with China creates a geopolitical bifurcation of the world’s nuclear powers. We live in interesting and exhausting times, with people tired and frustrated with the events since 2020. Lockdowns over the past years could lead to extended summer vacations Lockdowns ended in the US as vaccines went into arms. People have returned to work and school. In China, the COVID-19 restrictions appear to be easing. In early June 2022, the coming summer months offer the opportunity to rest, relax and recharge internal batteries for the second half of 2022. The demand for travel, hotel rooms, and other vacation-related consumer products has soared. Inflation and supply chain bottlenecks have only increased prices, but the demand is robust. As market participants take a few weeks off over the coming months, they are likely to turn off their screens and ignore the market action that could interfere with good times with friends and family. Increased vacations may bolster earnings for travel-related businesses, but it will reduce market liquidity as a vacation for many includes a rest period from watching or participating in markets across all asset classes. Lots of head-fake moves on the horizon As liquidity declines because of a lack of participation, markets will likely become a lot bumpier over the coming weeks and months. Selling could lead to downdrafts and buying may create rip-your-face-off rallies. These events cause head-fake moves that can cause even the most experienced traders and investors more than a bit of indigestion. A decline in liquidity could dramatically increase price variance. The geopolitical and economic landscapes will not take any vacation during the summer of 2022. Expect the unexpected- Volatility leads to opportunity Expecting the unexpected will reduce the stress-related with sudden market volatility. Moreover, higher price variance increases opportunities for nimble traders and investors with their fingers on the pulse of markets. Approach markets with a sold risk-reward plan that avoids open-ended risks. Even though declining liquidity can cause markets to rise or fall to irrational price levels, always remember the current price is always the correct price because it is the level where buyers and sellers meet in a transparent environment, the marketplace. Do not be afraid to take small losses and remember to take those profits or adjust risk levels to protect them when markets reach targets. Trading or investing with a plan and sticking to it avoids the ego-related mistakes that cause us to believe we are always right, and the market is wrong. The market price is never wrong. Meanwhile, combinations of put and call options can protect the downside, hedging portfolios while allowing for upside participation that will enable you to enjoy your time off from the daily grind. Enjoy the summer but keep your eyes open for opportunities. Adjust your mindset to expect the unexpected and embrace the higher volatility that comes alongside lower liquidity. Price variance is a nightmare for the passive, but it creates a world of opportunity for the dynamic. -- Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
LEducation
by Andy_Hecht
1
Investment idea - forestry and lumber. - Interfor Corp - CanadaInterfor Corporation IFP - Canada (IFP) Interfor Corporation is a Canada-based forest products company. The Company and its subsidiaries produce wood products in British Columbia, the United States Northwest and the United States South for sale to markets around the world. At the time of writing this on, 19/3/2022, the share price at $42 is just a whisker below the all-time-high of $44 reached in mid January. Interfor Corporation is the 7th largest producer of sawmill timber in the world. Interfor Corporation operates about 15 sawmills in Canada, Oregon, Washington, South Carolina, Arkansas and Georgia. Most of the land on which the company harvests timber is owned by British Columbia. Interfor makes lumber for the construction market, logs for industrial processing, and wood chips for pulp production. The company says it is “The only pure-play lumber producer of scale” Why am I buying Interfor? With a prospective p/e ratio of below 4, a possible dividend yield of over 5%, (see dividend comments below), high historical sales and earnings growth, and sharply rising analysts' forecasts, the fundamentals make Interfor look like the most attractive in the forestry and lumber producer sector. I like the inflation play. It has very strong positive cash flow. Net income, (before non-cash items and acquisitions), is equivalent to one-third of its market cap. Catalyst for more growth The timber production market is highly fragmented. This has historically worked to Interfor’s advantage. Multiple acquisitions have have helped Interfor to grow. Potential takeover offer Interfor’s annual accounts and cash flow statement show that in 2021 they had net earnings of CAD819 million before items not involving cash, and before investing activities. That’s a third of its CAD 2.4 billion market cap. A takeover of the company could be easily financed out of its own cash-flow, with plenty left for the acquirer. Given their modest size of USD 1.92 billion, they could easily become the target of a larger rival or a value investor. I think Interfor would be an interesting acquisition for a seasoned Canadian investor, such as the 91-year-old Jim Pattison of Jim Pattison Group. He owns 51% of rival Canfor Corp. The largest investor in Interfor is Letko, Brosseau & Associates Inc. They own 10.8% of Interfor Corp. They are a Canadian institutional investment manger, with an interests in "Growth Through Value Investing" and in "Sustainable investing". They often exercise their shareholder votes, particularly when there are takeover offers, typically refusing what they see as low-ball offers. If Jim Pittard wanted to acquire Interfor he would need to get Letko Brosseau onside first before making any offer. Lumber Prices High Lumber prices boost Interfor’s profit. You are no doubt aware that Lumber prices have been strong over the last 2 years. Year end Price Random Length Lumber futures on CME front month. 2014 $319 2015 $247 2016 $328 2017 $459 2018 $343 2019 $416 2020 $716 2021 $1227 18/3/22 $1200 The average selling price of Lumber in Q1 2020 was $842. In Q1 2021 it was $1143. So far in Q1 2022 it looks like it is going to be about $960. See the 50 year and 3 year charts below. Various reasons are being given for the high Lumber prices. These include flooding in British Columbia. It knocked out road and rail links in December. Mudslides disrupted Vancouver shipments. Beetle infestations, wildfires, and government restraints on tree harvesting limited availability of mature trees. Sawmills were said to be struggling to keep up with demand in part due to a shortage of workers. At the same time the supply chain was being disrupted by the pandemic effect on the transportation network. There simply were not enough vehicles or trucks to get lumber to market, so backlogs were building up at sawmills. The net effect was that supply to the market fell. At the same time, the Pandemic created unprecedented demand for home improvements. Home improvements more than compensated for any fall in homebuilding due to the pandemic. It was a perfect storm. Supply fell and demand rose. Since some of these one-off effects are now dissipating we could see lumber prices going lower as supply returns to normal. On the other hand any extra supply might be absorbed by new home construction. Home-buiding is said to have been constrained during the pandemic. Going forwards, lumber prices are likely to be heavily influenced by housing starts. With property prices up around 15% over the last year, it looks like demand is currently strong. Freddie Mac sees house price inflation gradually dropping to 2.5% by 2023, but obviously that still means higher prices than at present, and ongoing demand for new constructions. According to many articles housing inventories vs demand are at record lows for decades, and it’s likely to take years before the supply and demand balance out. Dividend: In May 2021 Interfor declared a "one-time special cash dividend" of $2. At the time they wrote: "“This special dividend reflects a partial distribution of the extraordinary cash flows being generated from record lumber markets” said Ian Fillinger, President and Chief Executive Officer. “We are able to reward our shareholders with this return of capital, while retaining ample financial flexibility to complete our multi-year strategic capital plans, grow significantly through acquisitions and continue to buy back Interfor shares.” Will this “one-time” special dividend be repeated this year? I am concluding that it is possible for several reasons: Firstly the company has more liquid cash on hand at the end of 2021 than it had at the end of 2020. In fact it has more than four times the cash needed to pay the same dividend. Secondly, the price of lumber remains strong, well above the average during 2021. Thirdly, the company recently expressed strong confidence about the lumber price driven by strong demand from new housing starts, and stated that it is well positioned with a strong balance sheet and “significant available liquidity”. Fourthly the company share capital has reduced by about 10% due to share buy-backs in 2020. This means that the same special dividend would cost less than last year. If the company pays a $2 special dividend - as per 2021, the yield will be 5%. The decision on dividend should be made in May. Share buy backs In 2021 Interfor purchased nearly 10% of its share capital. It was 100% of the amount allowed. The authorisation has been renewed again for 2022, again allowing for the purchase of nearly 10% of the share capital. Sales Growth Interfor’s historical lumber sales growth is reported as being 16.41%. In 2021 it was +50% helped by the acquisition. Analysts are forecasting that Interfor’s sales will increase by 17.3% in 2022. Acquisition The company made a major acquisition late last year (Eacom Timber Corp). As a result of this and high lumber prices, analysts have been raising their EPS forecasts for 2022. Currently analysts are forecasting EPS of close to CAD 11 per share. in 202 Interfor reported EPS was $12.80. The share price is currently close to $42 so the prospective p/e ratio is low (around 4x). If the company pays a $2 special dividend - as per 2021, the yield will be 5%. The decision on dividend should be made in May. Interfor’s historical lumber sales growth is reported as being 16.41%. In 2021 it was 50% helped by the acquisition. Analysts are forecasting that Interfor’s sales will increase by 17.3% in 2022. Earnings The future earnings of the company will, to some extent, depend on Lumber prices. The higher the better. The demand for Lumber will be heavily influenced by new home constructions. Interfor is thus an inflation play, especially if house prices keep rising. Analysts are increasing their earnings forecasts. Click below to see the latest lumber price progression CME:LBS2!
TSX:IFP
by Clive_Thompson
Leader of the wood industry $UFPI is giving bullish signsUFP Industries, which makes lumber and other building products has 216 locations in eight countries making wood and wood-alternative products for retail, construction and industrial customers. After making an ATH at $94 in January, has formed a good cup & handle pattern with a pivot buy above $88.10. The handle shows a good volatility contraction as it has low volume. This is a very good sign and could help the price to have an explosive move up. Also the MACD is been trending up since mid February. In IBD, NASDAQ:UFPI ranks No. 1 in its building-wood group, with a 89 Relative Strength rating. As you can see above the chart, while the AMEX:SPY has been trending down while NASDAQ:UFPI is making higher lows. With lumber prices in an uptrend, this leader could give a really good bull run.
NASDAQ:UFPILong
by dpuleo19