at the highs of the day. Much like Monday’s performance, the percent gains were in a tight range across the board with the Nasdaq Composite leading the way at 1.2%. The S&P Midcap 400 Index ($MID) was right behind at 1.1%. Both the S&P 500 Index ($SPX) and Dow Jones Industrial Average ($DJIA) closed up 1.0%. The The small-cap Russell 2000 Index ($RUT) added 0.9%. All the major averages closed in the top 5% of the day’s range.
While Spain and Greece were very much the focal point of Wall Street for Q1-Q2 of 2012, the price action in the iShares MSCI Spain Index (NYSEARCA:EWP) is quietly making a nice comeback. After a strong rally off the summer low which broke the weekly downtrend line, $EWP stalled out at resistance around $30.00. A breakout above $30.00 should find resistance at a weekly downtrend line around $35.00.
Dropping down to a daily chart we see that the short-term downtrend line has been broken, which means that $EWP should now form the right hand side of the base and continue to set higher swing lows above the 50-day MA. $EWP has yet to form a low risk buy point so we will just continue to monitor the action for now.
The financial sector is also forming a bullish consolidation pattern above the 50-day MA. The daily chart of the Financial Select Sector SPDR (NYSEARCA:XLF) is in pretty good shape and showing a bit of relative strength the past few weeks. $XLF has set a higher swing low while the S&P 500 undercut the prior swing low and the 50-day MA. We look for the price action to tighten up over the next week or two to provide us with a low risk entry point.
The weekly chart of $XLF shows clear resistance at $17.00, which would be an easy target for a breakout trade if/when it triggers.
So far the market has put in a solid reversal day and a strong follow through day off the lows. However, the big question here is will the Nasdaq and the small cap Russell 2000 act as a drag on the market. Both of these averages showed relative weakness to the S&P 500 by breaking a prior swing low and have more resistance to clear before getting back on track.