As I’ve been saying all along, nothing is solved until the DEBT SATURATION is resolved. Depressions move in 3 waves, A down, B up, C down. The psychology of each wave is different – wave A equals “oh no!†Wave B equals “we’re saved.†And wave C equals real change is forced to occur – no fooling around this time. You can clearly see how the psychology is different now than it was during the plunge in 2008. Instead of “stimulus†the buzz word is “austerity.â€Â
No where else are the A,B,C waves more clear than in the price of lumber. First let’s look at a monthly chart of lumber going back to about 2001. You can see a sharp rise into a $460 peak, then a plummet that led the stock market by nearly 3 years all the way down to $140 – a stunning 70% collapse! That would be wave A. Note on this chart that the current month’s price of $182.80 is not yet reflected:
Then we bounced smartly all the way back to a recent April peak of $325, that would be wave B.
Since April, lumber prices have collapsed 44%, dipping below $180 and today is sitting at $182.80 – here are a couple of daily chart presentations, the top one is most current, but the bottom one is a better candlestick presentation:
Sure looks and feels like wave C.
And who could have guessed? Housing sales/prices have not bounced one iota… “It’s contained,†became “It’s stabilized.†Riiight, just like this ten year chart of New Home Sales shows:
read the rest: http://economicedge.blogspot.com/2010/06/lumber-prices-indicate-next-wave-down.html
