Market Summary
This is an FDP reversal week as well as a 3-week interval. This three week interval is the third consecutive one making this rally now nine weeks old. Historically, "extended" trends last nine weeks. This one has certainly given buyers ample time and opportunity to build spring inventories.
Producer order files are over stated. We recall that to begin last week, most were claiming three weeks...some even boasting a four week back log. You will also recall how Layman's Guide readers were warned of the improbability that mills had sold 200% of production for three consecutive weeks to create that order file. Those over exaggerations will be evident by the end of this week after seeing more suddenly prompt wood and order files down one week or less.
Truckload and rail car deliveries are not an issue. Flatbeds and drivers are readily available and should remain fluid through April. All told, our lumber market is losing upside momentum and reversing to a spring bear market with no delivery disruptions.
Producer Order Files
The proclaimed producer 3-week order file has a negative market impact, especially with only 1.2 million housing starts. If indeed it is true, our lumber market is grossly over bought. Regardless, downside momentum will accelerate while buyers liquidate recent purchases.
Forecast
Spring is here on the calendar yet spring weather has been here since February. That implies much of spring's housing starts have already been started. The question now is, are there enough qualified home buyers to jack this housing market up another notch? Static mortgage applications and rates say no.
Strategy
Prepare for price weakness and downside acceleration through April. The surprise to the economy will be no housing follow through in May.