Crude Oil Set to Re-Couple with S&P 500 WTI Crude Oil (NY Close): $100.74 // +1.65 // +1.67% Crude prices managed to decouple from the selloff in equities again yesterday after rumors that OPEC would raise their output quota were disappointed and official DOE inventory figures broadly reinforced preliminary reports showing US stockpiles saw a hefty drawdown last week. On balance, the disconnect seems inherently temporary considering the overall path of the WTI contract is no less a reflection of investors’ assessment of global economic growth prospects than the S&P 500, a worthy proxy for equity performance at large. As such, a re-coupling seems likely through the end of the week as familiar dynamics are given room to reassert themselves. With that in mind, S&P 500 index futures are pushing higher ahead of the opening bell on Wall Street with traders apparently taking the lull in major event risk to engineer a relief rally, and crude appears likely to fall in line. From a technical perspective however, overall positioning remains bearish so long as a daily close above $103.30 does not materialize, painting the current setup as consolidation within the scope of a larger down move. A break through support at the bottom of the triangle pattern set from the May 6 low initially exposes supports at $96.43 and $92.54. Gold, Silver Prices Remain at Standstill Spot Gold (NY Close): $1537.65 // -6.50 // -0.42% Broadly speaking, gold prices remain at a standstill between$1533.12 and $1549.91, the 61.8% and 76.4% Fibonacci retracements of the drop from the May 2 high, respectively. As we discussed in our weekly forecast, this apparent indecision reflects lingering uncertainty about gold’s place in today’s bipolar marketplace, where most assets are clearly established on the “risky” or “safe-haven” side of the spectrum. On balance, a slow rebound in investment demand seems to suggest that the path of least resistance is broadly higher. Ultimately – as we noted yesterday – the key question at this point is whether the bearish cues now apparent in overall S&P 500 positioning owe to the unwinding of Dollar-funded positions as QE2 expires (a gold-negative scenario) or to a dour outlook on US economic growth (a gold-positive scenario). The cross-pollination between these themes ultimately produces the sideways trade we see before us today and it will be critical to establish a bearing on just how much the US economy will slow in the second half of the year to give the metal a sustainable directional bias. In the meantime, the landscape remains clouded. Spot Silver (NY Close): $36.82 // -0.34 // -0.90% As with gold, silver is finding it difficult to find its place in the current market environment. Technically speaking, a triangle continuation pattern is taking shape below the 38.2% Fibonacci retracement of the drop the late April high at $38.88, with the preceding decline arguing for renewed selling ahead. Initial support lines up at $36.37, the 23.6% Fib, followed by the triangle’s lower boundary as well as the minor 14.6% retracement level at $34.83. A daily close below the latter boundary exposes the May 12 low at $32.32.

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