Can Energy Continue to Lead the Market?

Watching the action today, I am compelled to question the short-term prospects of the market.  Glancing at today's leaders, I can't help but notice the glaring commonality amongst the leadership groups.  Any guesses???  Inflation.  The market is being buoyed by sectors that are fundamentally inflationary.  For instance, the majority of today's winners are energy related.  Furthermore, commodity groups such as precious metals, raw materials, and agriculture are doing well today.  The presumption is, that the current run in crude prices will spark inflation.  

Thus far, high oil prices haven't affected the major indices that greatly.  Can this phenomenon continue?  With a slightly overbought technical condition, relatively light volume, and lack of other tangible catalysts, the odds seem against it.  Also, next week may have even lighter volume since May options expiration ends today. 

Much of the bounce off of the January lows was caused by a renewed optimism  for some type of economic recovery as a result of the Fed's drastic cut in interest rates.  With the Fed Funds rate now anchored around 2%, it will be difficult for the general market to rally solely on the premise of economic revitalization and a stable dollar.  This premise will become threatened by continued evidence of inflation.

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