Stock Action Positive, Albeit On Light Volume

Stock action continues to be solid, with more stocks breaking back above their 50-day averages, and also more stocks breaking out to new highs. The overall volume on the exchanges continues to be light, but that is just a yellow flag at this point.

There were no major economic releases this morning. Australia announced it was again hiking its benchmark interest rate, but Asian markets were mostly higher nonetheless.

The dollar is a bit weak this morning, which is helping commodities rally. Oil is up near $79.75, and gold is above $1125.

Energy and materials stocks are leading the action so far. In the agribusiness sector, CF Industries (CF) updated its offer to $4.5 billion for rival Terra Industries (TRA).

Among the sector ETFs, gold miners (GDX) are leading, +2.85%, followed by steel (SLX), +2.05%). Homebuilders (XHB) are the biggest laggards, -0.43%.

The 10-year yield is higher at 3.64%; and the VIX is down another -2.25% to 18.83, its lowest level since Jan. 20th.

Trading comment: I have not changed my feelings about the market that I have stated over the last several days. The action is positive, and many growth stocks are acting well. This is the process of building the right side of stock bases on the charts (the left side being the decline from the correction).

While this process has further to go, not all stocks take the same amount of time to form bases and breakout again. This is why I try to focus on the leaders. Those stocks that broke out to new highs yesterday and today, at least the ones with good fundamentals, should go on to lead this rally (for as long as it lasts).