The market opened higher today and rose nicely during the first hour of trading.The S&P reversed and ended 20 points lower off its highs from early morning trading.

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This reversal came on a day when the Fed addressed the economic issues facing the U.S.The Federal Reserve expects the economy to improve in the coming months, but lowered their outlook for this year.

The Fed cited a number of positive signs that economic recovery is on its way, yet the economy’s performance is expected to be very poor.They cited improving financial conditions, increased factory production, and “tentative indications that activity in the housing sector might be nearing a bottom.”

In contrast,

New Federal Projections:

  • Economy will shrink 1.3%-2% verse a previous forcast of 0.5%-1.3%
  • Unemployment may rise to 9.6% (maybe >10%) verses a previous forecast of 8.8%
  • No new money for stimulating economic growth, but more may be needed.
  • Low inflation through 2011
  • Economy may take 5-6 years to fully recover.

While the Fed recognized economic improvement in the first part of 2009, their optimism for the speed of recovery weakened.We may yet see some tough economic numbers.

Happy Trades