Rising lumber prices have been a major source of inflation concerns. It’s one thing when the price of lumber doubles, and a whole other thing when it goes up five-fold!
Yep, that’s right. Lumber prices have rocketed higher over the past 18 months, surging five times the COVID crash price low.
Something’s Gotta Give!
Today’s long-term “monthly” lumber chart highlights why there is a potential for a reversal/pullback in lumber prices over the coming weeks and months.
As you can see, the surge in lumber has price testing the 261% Fibonacci extension level, as well as the underside of the 40-year overhead rising resistance line at (1). Note as well that momentum is near its highest levels in history. Seems like a good area for a pause.
So how do we know if a pullback is under way?
Watch that trendline. The steep up-trendline (3) offers short-term support. If it breaks, it could be “timber time” for lumber. Stay tuned.