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ShadowTraderPro Focus Report for September 19, 2008 The ShadowTraderPro Focus Report is your every morning dose of market reality brought to you from the resident geniuses at ShadowTrader. Overseen by Chief Equity Strategist, Peter Reznicek, each issue contains a full report on the prior day's action, including market internals, technicals, and what sectors were hot and cold. Each issue also includes the ShadowTraderPro Model Portfolio, which updates members on what stock plays STPro is currently engaged in officially, as well as provide a daily list of long and short setups for more self-directed traders and investors. If you have any questions or comments regarding commentary or plays in this newsletter, please email to focusreport@shadowtrader.net. The Big PictureGood Morning, Traders. If the aforementioned catalysts coming together do indeed form a bottom in this area, be aware that current market condtions are dictating that the action will be fast and furious and will "all happen at once", so to speak. Meaning that there could easily be an intraday reversal today that puts the Dow's range at more than 500 points from high to low. That was from yesterday's Focus Report. Below are a couple of charts showing the technical setup which set the move off. 
Same chart from yesterday reiterating the monthly support at 1136.15. Yesterday's low was 1133.50 
In an insane environment like this what you want is a touchdown to a prior support level (the 1136 area), then you wait for some sort of reversal pattern to "cement" in the low. In yesterday's case it was the hourly hammer candle forming. Hourly hammers are powerful and are almost always tradeable in the direction opposite the shadow (or wick/tail) for a solid move, especially in the indices. Note how the high point of the reversal bar is right at an intraday downtrendline. The move over the high of the bar itself is a powerful signal. When coupled with the trendline break, it only serves to strengthen the signal. 
Further confirmation came in the form of the spike in the $VIX which occurred at exactly the same time. The whole world has been watching the highs of the range in the $vix which were at 35-36. When this started to move into the 40's, it tells you that something is definitely up. What is up is that Joe Sixpack is either dumping his 100 shares of AAPL at the exact wrong time or buying out of the money puts like its going out of style. The rest as they say is history. The Dow actually ran over 600 points from high to low, making our prediction of a 500 point range quite tame in reality. We wish more than anything that we could tell our loyal readers that this is it and that was the bottom. The reality is, however, that nobody can really know this for sure, even with all the signals we have discussed in these last two reports from the insane breadth readings to the massive advance decline lines to yesterday's $VIX spike. Is the bad news in the credit/financial sector over? Probably not. The difference (and subsequent sustained change in trend) will come when the bad news continues to spill out and the market starts ignoring it completely. We have not seen that yet. We remain cautious, underinvested, and nimble. Under The Hood
Heads Up
Bulls and BearsLong Ideas
ShadowTrader Model PortfolioTo get the most out of your subscription and for detailed instructions on how to structure your own portfolio, read our Focus Report User's Guide
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