| ShadowTraderPro Focus Report for March 19, 2009 The ShadowTraderPro Focus Reportis your every morning dose of market reality brought to you from theresident geniuses at ShadowTrader. Overseen by Chief Equity Strategist,Peter Reznicek, each issue contains a full report on the prior day'saction, including market internals, technicals, and what sectors werehot and cold. Each issue also includes the ShadowTraderPro ModelPortfolio, which updates members on what stock plays STPro is currentlyengaged in officially, as well as provide a daily list of long andshort 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. Yesterday brought back memories of the go-go days when former Federal Reserve Chairman Alan Greenspan would lead the Federal Reserve to a 50 basis point rate cut that would send the markets flying. This time the Fed announced measures to head off the country's economic woes and the market responded with a dramatic run higher that resulted in the S&P 500 (SPX) touching our target level of 800 before closing the day at 794.35. Up until the announcement yesterday, the market was rather lethargic, but every sector ripped higher almost immediately after the Fed made their plans public and consistent with closing market action over the prior six days, the market maintained its strength into the final minutes of trading. Because of the feast that bulls gorged themselves on yesterday, we would normally be pounding the table for our fellow ShadowTraders to short every stock in sight. But because Friday is options expiry, trading becomes much more complicated. Instead of illustrating just one index for our discussion today, we decided to use the broader lens of all four major indices. What we discovered from our analysis after the market close was that the market is actually more reticent in showing us where it intends to go next, in spite of yesterday's explosive rally. Let's look at the charts below for more detail.  While looking at the matrix of charts above, the solid blue horizontal lines and purple boxes represent recent swing lows in the markets that we feel should act as new resistance on this test from the depths of Hades. By observing the top left chart, we see that the NASDAQ 100 Index ($NDX) has blown through its prior low level (orange oval) and broken above its 50 day moving average (green box). Notice also that the $NDX has now moved into an area of lighter resistance (blue shaded area) so a continued move upward should be less difficult. If we were looking at the $NDX exclusively for market direction we would have an bullish view overall. Now looking at the SPX chart (top right), it is clear that this index is at a crossroads. It is facing the resistance of the declining green trendline, the 50 day moving average (red line) and its prior low (blue line). Each of these resistance points are encircled in the orange oval. Observing this chart alone would cause us to have a more bearish outlook because a pullback seems to be in order. The two lower charts of the Dow Jones Industrial Average ($DJX) (lower left) and the Russell 2000 Index ($RUT) have similar outlooks to each other. If they can break the green descending trendline they both would have a good chance of moving up to their 50 day moving average, and then possibly up to their prior low (blue line). But whether they will break the green trendline remains to be seen and placing a trade before that battle is decided is nothing short of gambling. If we were observing these two charts alone for market direction, we would be neutral. So the bottom line here is that there are a number of factors which has us not as bearish as we thought we would be at $SPX 800. To recap, all of the averages are out of sync with each other, with some actually in the clear for more gains, and others at resistance. Key sectors such as $XBD are acting rather hunky as of late (note the GS breakout over strong resistance) and the market's tone is generally bullish into expiry. It's clear at any rate that we should allow the market a couple more days here to show its hand. While the 800 S&P did act as a perfect top to punctuate yesterday's fed action, everything else above does not inspire us to place any more capital at risk during the final two days of trading this week. There will be ample opportunity to gain footholds in long or short positions next week as issues such as XBD, APPL, GS, ABC, GS and others remain on our radar for proper entry points. Under The Hood
Heads Up
Bulls and BearsLong Ideas
ShadowTrader Model PortfolioTo get the most out of your subscription and for detailed instructionson how to structure your own portfolio, read our Focus Report User's Guide
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