PassportJS - LocalStrategy with Express 4

I am relatively new to nodejs and particaullary new to expressjs framework.

I need to implement and simple local authentication for my web app. I decided to use passportjs with LocalStrategy to achive this.

I read trough the documentation and looked through some examples, but I can't seem to get it to work.

Here is how I setup up passportjs. I have moved it in a separate module in order not to clutter the app.js.

var passport = require('passport');
var session = require('express-session');
var flash = require('connect-flash');
var express = require('express');
var router = express.Router();
var LocalStrategy = require('passport-local');

module.exports = function() {
    function setupPassport(app) {
        setupPassportSettings(app, passport);

        app.use(session({ secret: 'expensestracker' }));
        app.use(passport.initialize());
        app.use(passport.session());
        app.use(flash());

        setupRoutes(app, passport);
    }

    function setupPassportSettings(app, passport){
        passport.use(new LocalStrategy({
                usernameField: 'email',
                passwordField: 'password'
            },
            function(username, password, done) {
                // **this is never called...**
                console.log('trying to understand if local startegy will be called...');
            }
        ));

        console.log('local strategy is setup...');
    }

    function setupRoutes(app, passport) {
        router.get('/signin', function(req, res){
            console.log('this will be sign in page...');
            res.send('sign in page');
        });

        router.post('/signin', function(req, res){
           console.log('this will be invoked when usesrs posts the login form...');
            res.send('signed in...');
        });

        app.post('/signin', passport.authenticate('local', { successRedirect: '/',
            failureRedirect: '/login' }));
       console.log('passport routes registered');
    }

    return {
      setupPassport : setupPassport
    };
}();

Here is my package.json file. Maybe it has something to do with versions of the packages.

{
  "name": "nodetraining",
  "version": "0.0.1",
  "private": true,
  "scripts": {
    "start": "node ./bin/www"
  },
  "dependencies": {
    "body-parser": "~1.0.0",
    "connect-flash": "^0.1.1",
    "cookie-parser": "~1.0.1",
    "debug": "~0.7.4",
    "express": "~4.2.0",
    "express-session": "^1.8.2",
    "jade": "~1.3.0",
    "mongodb": "*",
    "monk": "*",
    "morgan": "~1.0.0",
    "passport": "^0.2.1",
    "passport-local": "^1.0.0",
    "static-favicon": "~1.0.0"
  }
}

Here is the part of app.js where I call my module to setup the passport

var app = express();

// view engine setup
app.set('views', path.join(__dirname, 'views'));
app.set('view engine', 'jade');
passportSetup.setupPassport(app);
app.use(favicon());
app.use(logger('dev'));
app.use(bodyParser.json());
app.use(bodyParser.urlencoded());
app.use(cookieParser());
app.use(express.static(path.join(__dirname, 'public')));

So it looks like the LocalStrategy call back function is never invoked and I am allowed to access any resource in my web app.