Despite three days of 'big' moves of more than one standard deviation over the average one-day percent-move, Lumber Futures (CME.LB) have actually been flat the past week of trading, although yesterday they dropped 3.7% to close at $210.70 per thousand board feet after losing $8 on the day. Lumber also crossed below its all time low, and recently small traders went short on Lumber. The recent sideways move might be a pause before further downswings.
Q: How have lumber futures reacted historically to crossing below their all time lowest low when small traders are short, omitting any repeat occurrences within 10 trading days?
A: According to the 12 previous occurrences of this event, EventEdge indicates that CME.LB has shown a strong bearish edge that peaks 29 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Wednesday, Sept. 24, 2008) is Tuesday, Nov. 4, 2008.
CME.LB declines in 92% of the cases (11 of 12) by an average of 11.6% relative to the close on the event date. The average of the one rally is 0.5%. The overall return of the 12 cases is -10.6%, which, based on the close of CME.LB on the event date ($210.70), provides a target price of $188.40.
to view this idea with our EventEdge® analysis tool, click here
Jeffrey Garceau is an analyst with MarketHistory.com.
Related Ideas:
Lumber Futures Heading Down the Bear River - September 22, 2008
Lumber Collapses after a major Hurricane? - September 16, 2008
Lumber Futures to Follow Averages - September 10, 2008
