As many of us have learned the hard way, the markets will act on their own accord and many times it seems without reason. As we continue to see sideways action across the major indices, the short term 2-5 day swing trades have been the most profitable over the first month of 2009.

We made an attempted rally last week which only made it to the 50% Fibonacci retracement level (using the highs from January 09). Looking at the markets from the psychological side, many headlines, news reviews, and magazines speak of a gloomy 2009. Consumers are fearful, while the contrarian is preparing for a bounce. We see a hammer on the VIX however, following two inverted hammers this creates opposing tales, meaning indecision and once again confirming the sideways movement. The strength in the Financials (XLF) was quickly given back, filling the gap up from Wednesday.
On a broader note, we have seen an increasing divergence in the short term interest rate versus long term paper, that being, the 25 basis point short term interest rate versus the long term 10, 20 and 30 year treasury bonds. This is one of the largest divergences in history and should be taken note of.