Is the washout done?
What a ride in lumber this year. It's one thing to have a chart like this in a cryptocurrency or meme stock but lumber is something virtually everyone in the world needs in their life.
It doesn't look like much because of the crushing decline in this chart but lumber prices are up more than 7% today.
I wrote last week about the troublesome dynamic in this market. Wholesale prices have collapsed more than 70% but retail prices are only down 14% from the high as lumber yards try to offload over-priced inventories on retail. That has artificially depressed demand but it also ensures stronger demand once prices finally adjust.
Of course you're probably not trading lumber (futures are ultra-thin) so why mention lumber? It's turned into a bit of a leading indicator (real or perceived) on the reflation trade. It's not just the pop either, it held up this week during the broad market rout.
Another challenge will come tomorrow with the US existing home sales report. The consensus is 5.90m but our friend Christope Barraud ensures us that it will miss estimates. He has a great track record on this report. Watch how lumber responds if it does. If it holds up, that would be a great sign for the reflation trade more broadly.
