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Wednesday, November 07, 2012

Lumber Futures Close to Triple-Top Major Resistance

Lumber futures are close to triple-top major resistance, as shown on the Weekly chart below. This latest rally from the September lows has occurred on declining weekly volumes. Expensive lumber would make it difficult for hombuilders' profits to continue to expand at the same rate that they enjoyed prior to the rally, which began in October 2011, producing an approximate 64% rise in lumber prices.

If lumber stays elevated, no doubt we'll see rising new home prices...perhaps quite sharply. This could be what Ben Bernanke is banking on...but, this could backfire if new home sales drop off dramatically and then continue to decline. We'll see if lumber prices start to moderate any time soon.