May Lumber Futures
I have spent some considerably time delving into the structural landscape of the lumber futures market. When employing top down analysis it is necessary to first address the long term dominant time-frame price charts. I began with the monthly which extends to 1972, the beginning of the contract’s life. I have managed to map out what I believe to be the best Elliot Wave interpretation of the contracts price path. It appears to me that we are witnessing a complex W-X-Y pattern unfold. This structure in my opinion is extremely close to having run its course. As of today the May contract, settling at 533.50, sits just below a rising major channel convergence zone (+/- 550). These angles date back to 2009 and 2001. Furthermore there is apparent momentum divergence in the weekly, daily and hourly price charts. Taking a closer look at the above chart you will notice a sequence of alphabetical and numerical markings. From the last inner b) wave low of October 2015 the market has advanced, in what I am purposing to be, the terminal c) wave sequence of the entire structure. This last leg according to the theory needs to play out in a 5 wave pattern. To address this issue I analyzed the structural evidence of the 240 min price chart. Certain ratios, as contended by the Elliot camp, show up time and time again. In this price structure the 3rd wave has a 1.618 relationship to the 1st and the final 5th wave measures an approximate 1 to 1 relation to the 1st. This is classic in my opinion. Considering all of this we out recommending the use of longer term put options to take advantage of this scenario playing out. We are currently favoring several strategies. Please reach out to us at Walsh Trading to further discuss our insights.
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