Oil is set to diverge with gold and silver as technical positioning and the likely response to tomorrow's US economic data leads prices in opposite directions, adding to evidence that the risk vs. safety dichotomy that has been driving markets over the past two years is waning. Commodities – Energy OIL POSITIONING HINTS LOSSES BUT US DATA MAY OFFER SUPPORT Crude Oil (WTI) $73.34 -$0.06 -0.08% A possible double top may be forming below $74.69 as negative RSI divergence hints at a forthcoming downswing. Initial support lines up at the bottom of a rising channel that has guided prices higher since the swing bottom below $70 put in earlier this month, now at $72.92. November’s US Personal Income and New Home Sales figures will be of interest late into the session; preliminary forecasts call for improvements on both metrics, which may prove supportive as markets become increasingly confident in the recovery taking shape in the world’s largest crude consumer. An upward revision to December’s Univ. of Michigan Confidence indicator offers similar potential. METALS POSITION TO CORRECT HIGHER BUT US DATA MAY THWART BULLS Gold $1085.06 +$1.06 +0.10% Gold prices are showing a Falling Wedge bullish reversal chart formation, with positive divergence on the RSI oscillator bolstering the case for an upswing. However, the metal retains a strong inverse correlation with the outlook Federal Reserve monetary policy (as expressed by the spread between Dec’2010 and Mar’2010 fed funds futures), which may thwart bullish momentum if the upcoming set of US economic data helps to underpin the upward correction in US interest rate expectations over recent weeks. Indeed, as mentioned above, economists are calling for improvements in November’s US Personal Income and New Home Sales figures as well as an upward revision to December’s Univ. of Michigan confidence reading. Silver $16.97 -$0.03 -0.15% Near-term silver positioning is strikingly similar to that of its more expensive counterpart, with prices showing a bullish Falling Wedge with positive RSI divergence. A break beyond the wedge top (now at $17.21) exposes horizontal resistance at $17.65. Also in line with gold, however, a significant inverse correlation with the 2010 fed funds futures spread hints that higher readings on tomorrow’s US economic data releases may undermine a bullish outcome.

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