The Message from Lumber

May 15th, 2013

by Chris Kimble

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Lumber has traded within a falling channel for the past 20-years. When lumber has hit the bottom of the channel, stocks have followed to the tune of 100% rallies twice.

The key to this pattern is when Lumber is at the top of the channel and turns down, it seems to pull the economy and stock market lower with it.

The upper left chart shows that Lumber recently was at the top of the falling channel and the upper right chart reflects a breakdown in Lumber. Lumber as a leading indicator is usually a good bit ahead of the economy and stock market.

Is Lumber sending a macro message about the economy again that investors should respect? Or will it be different time?



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