Friday, May 31, 2013

LUMBER Daily Chart Bear Market Potential Death Cross

Here is an update of the lumber chart we have been watching. Lumber topped in March with a textbook rising wedge, overbot and negative divergence smack down. The 50-day MA is about to stab down through the 200-day MA (black circle) which is the infamous death cross. Do not put too much emphasis on golden (50 up through 200) and death crosses since more often than not price will bounce as a death cross occurs or collapse as a golden cross occurs. And lumber is receiving a dead-cat bounce right now.  Price has collapsed through many support levels like a baby grand piano crashing down through floors of a high rise apartment building. The blue lines show the 405 top. The 365 support collapse created a -10% correction for lumber. The 325 failure sends lumber into a bear market at -20% off the top. The drop to 282 from 405 is -30%. Lumber has lost one-third of its value in only two months time.

If builders do not need stick lumber, then the housing recovery is in trouble. Since lumber is ordered ahead of time in the chronology of building, this couple month drop in lumber should create negativity in the housing sector moving forward. Hedge funds and speculators are the cash buyers in the real estate sector these days causing prices to move higher, not Jane and John starting a new life together in their first house. These love birds remain in their parent's basement trying to keep noise to a minimum. The hedgies and speculators may be in for a surprise for the weeks and months ahead as they realize the buyers are not flocking to their doorsteps as they expected. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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