On Tuesday, investors’ attention again turned to Europe, and the news was not good. Not only did the leaders of France and Germany fail to reach an agreement on how to handle the economic crisis, but they left the impression that they had no new ideas. And so they “kicked the can down the road” by forming a new post called the “euro-zone chief” who could only make recommendations to the major members of the union, but who had no real power to implement policy.

U.S. markets took the European news badly, turning lower and killing a three-day rally that had set up the S&P 500 and the Dow Jones Industrial Average for a test of the first minor overhead objectives at 1,200 and 11,445, respectively. The failure to follow through after the Dow had rallied 879 points, or 8.3%, from the August low, and the S&P 500 had reversed 103 points, or 9.4%, from the August low, is a sign of weakness. Sellers appearing to have stopped the rally in its tracks on volume of just 1.1 billion shares and declines of over 3-to-1 on the Big Board and almost 4-to-1 on Nasdaq displays a surprising disappearance of upward momentum.

And so the next test will be the ability of buyers to find support somewhere in the wide range of trading that marked last week’s violent extremes. And overhanging the charts are numerous bear market indicators including a major head-and-shoulders neckline break, a Dow Theory bear market signal, massive downside volume accompanied by enormous negative breadth, and the crossing of the 50-day moving average through the 200-day moving average.

This last indicator, the crossing of two major moving averages, is considered by many technicians to be so significant that it has been called the “death cross.” As John Nyarade of MarketWatch put it, “It is commonly viewed as a harbinger of bear markets.” Studies have shown that the cross alone has minimal significance and one study even showed that six months later stocks had rallied by 5%. But when accompanied by other negative indicators, the combination is deadly with very high validity readings. Note the death cross on last Friday’s chart of the S&P 500, as well as our Trade of the Day, General Dynamics (NYSE:GD).

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

• See Serge Berger’s Daily Market Outlook: Why This Relief Rally Still Has Some Time Left
• See Sam Collins’ Trade of the Day: Get Out of General Dynamics While There’s Time
• See Serge Berger’s Trade of the Day: RIMM Almost Ripe for the Picking