Subject: Re: Lumber to gold ratio
No, I don't make much personal use of lumber futures as compared to gold as I haven't found the ratio to be sufficiently nimble for trades that may be closed in 7 to 30 days, but these kinds of studies are still worth perusing. Why so? It's still useful to know about a possibly imminent king tide even though you choose to run along the shoreline with the use of a conventional tide schedule. The latter function like clockwork, being the result of the moon's known travel route and resultant gravitational pull, whereas other factors make king tides a bit less predictable and manageable. It's kind of a waste not to make use of a runnable shoreline, even with an awareness a king tide is coming. We'll know when it actually does muck with the more usual tide functions and can leave the beach when it finally happens.

Concerning the actual parameters in the study, Mr. Gayed used a 13-period average of weekly spot prices on random length lumber futures and gold as quoted in US dollars per troy ounce and aligned to risk-on when lumber futures outperformed gold futures, as examined weekly. Random length lumber futures contracts actively trade in 3-month expiry time frames (Jan, Mar, May, Jul, Sep, Nov) and are priced in dollars per thousand board feet. The 'spot' prices quoted on most platforms are for the future contract closest to expiry. Some platforms do not include random length lumber futures quotes any longer because there are additional newer restrictions to trading these as compared to equity futures (lumber futures are not to be confused with e-minis).

I mentioned in the prior post that the S&P400 (/EMD) turned risk-on this Tuesday. The S&P400 is statistically cheaper than the other equity indexes, incidentally. The S&P500 (/ES), and DJIA (/YM) turned risk-on Thursday, and the NASDAQ 100 (/NQ) did so on Friday, so it looks like it's really 'risk-on' for who knows how long. It's difficult to get too excited despite the reduced inflation numbers because there is every reason to assume there are going to be some downwards earnings surprises for a while.