Lumber Boom & Bust & Boom Again? Wood If You Could Have Known!
From top to bottom, the trend changes in lumber were foreseeable... but only if you used the right lens!
by Nico Isaac
Updated: December 02, 2021
This winter holiday, momma may NOT be kissing Santa Claus underneath some tall, ornamented tree after all. Cites a November 26 Washington Post, the cost of Christmas Trees could increase by as much as 30% this year, whereby one shopper "saw artificial trees at Home Depot for $600 to $1,000."
Merry Sticker Shock!
And just like that, Balsam Fir's join the trend of runaway price spikes which have bewildered lumber "experts" for the better part of six months. It all began this May. At that time, lumber prices had rocketed 600% during the pandemic to record highs. And, according to the mainstream prognosticators, a combination of pent-up demand by a scorching housing market and a global bottleneck in sawmill production meant lumber's uptrend was the new normal. Here, these news items from the time build the bullish picture:
May 20 CNBC:
"Our belief is that this cycle that we're currently in is here for the foreseeable future. The hot lumber market [will] persist at least for a few more months."
May 25 Fortune:
"The Lumber Shortage Has No End in Sight"
May 5 Yahoo Finance:
"We are now in month No. 10 of what we believe to be an 18- to 24-month cycle. Price decline will not happen until there is a slowing of demand."
The bullish consensus was loud and clear. But it wasn't the only voice in town.
In our May 7 Daily Commodity Junctures, editor Jeffrey Kennedy presented this long-term Elliott wave labeled chart of lumber. In this interpretation, the minimum expectations of an impulsive rise had been reached; however, Jeffrey saw prices continuing higher for a few more months before embarking on a sharp reversal that would chop prices down to their very stump.
The end of the lumber boom, from an Elliott wave perspective, was very much in sight.
That same day, lumber prices peaked and began swaying in the wind. By late May, the boom was off the rose with prices down some 30%. In the June 11 Daily Commodity Junctures, Jeffrey Kennedy revisited his original wave count for lumber futures and said the May 7 peak marked a significant top.
This chart from the June 11 Daily Commodity Junctures drew the new path of least resistance; namely, down.
June marked lumber's worst monthly drop on record dating back to 1978. When prices bottomed in late August, they were 74% down and out all of their 2021 gains.
That was a low point in sentiment. The same experts who said lumber prices would continue growing to the sky back in May -- now said its bullish roots were dead. An August 28 Markets Insider gave "3 reasons why lumber prices will tumble 30% by year end" while a September 15 Fortune said the "lumber bubble has popped."
Once again, mainstream analysts had a blind spot where lumber's future was concerned. They could only see the current trend, and project it indefinitely outward. In our August 27 Daily Commodity Junctures, however, Jeffrey Kennedy showed this chart of lumber, which paved the way for a meaningful rebound in the weeks and months ahead.
And as this final chart shows, lumber prices rallied 50%-plus to the multi-month highs we see today.
Even if you don't have a tree this holiday season, we believe there's still a way to give the ultimate gift: a truly ground-breaking way to understand why price action is unfolding the way it is now -- and how it may continue to unfold in the future.
That gift is our premier Commodity Junctures Service. See below for all the details!
Euro Stoxx 50: Sentiment Hits “Bellringing” Extreme
This European sentiment measure was at an extreme for the better part of five years. Now, it appears the tide is turning. Be prepared! Optimistic or pessimistic extremes are usually followed by an extreme in the opposite direction.
EUR/USD: From 2-Year Highs to 2-Month Lows. Press “Pause” on the “Fed Pause.”
On May 3, the world's most heavily traded currency pair, the euro/U.S. dollar soared to its highest level in 2 years. Mainstream experts focused on the Fed. Expectations of a "pause" in rate hikes would keep the wind at the euro's back. But that's not what happened. And here's why.
See What Happens When the Fed's Rate Hikes Stop
See our seven-decade chart that shows what happens when the Federal Reserve ends the cycle of interest rate hikes.