Stocks opened sharply lower on fears of a default by Greece on its sovereign debt. Within minutes of the opening, the Dow industrials were off over 250 points as European bank stocks led the decline. But with the focus squarely on Europe, and especially Greece, stocks rallied late in the day when the Greek finance minister said that the country was close to a deal with the various European agencies.

But, according The Wall Street Journal, even if a deal is reached and Greece gets its money in July, it will only postpone the inevitable default: “Its budget deficit this year is likely to be 10% compared with a target of 7.5%, says Citigroup.”

Yesterday’s late rally was mostly led by the technology stocks, and so the Nasdaq was able to recoup over half of its early losses. But even though the rally was able to close the index above its 50-day moving average for the second day, it is now clearly overbought and due for more selling. Note that the stochastic is not only overbought, but that the last time it was this high was on Aug. 31, just prior to a sharp decline.

The broad-based S&P 500 didn’t fare quite as well as the Nasdaq yesterday. It turned away from its next barrier, the 50-day moving average, despite the late rally, which in the case of both the Dow and S&P 500, lost momentum in the last 15 minutes of trading and at the close were heading lower.

The next support for the S&P 500 is its 20-day moving average line (green line) at 1,183, but the major support is at its support line and last low in the bearish flag at 1,136 made on Sept. 12. A close under that low would result in a strong sell signal at which time sellers should add to bearish positions.

Last week resulted in an improvement for the bulls. But yesterday’s action confirmed that the bears are still in charge with volume and breadth distinct negatives for the bulls. The major trends are all pointing lower.

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: The Number the Bulls Must Conquer
• See Sam Collins’ Trade of the Day: Undervalued Gold Stock Yielding 10%
• See Serge Berger’s Trade of the Day: Can UPS Deliver Profits?