Following one of the best weeks in two months, last week’s performance through Thursday, put the Dow Jones Industrial Average on course for its sixth worst week in its 115-year history (off 6.4%), according to The Wall Street Journal. And even though the week ended with a mild recovery on Friday, the Dow has been down for seven of the past nine weeks.

The European sovereign debt issue was blamed for most of the selling. But the worst day, Thursday, was clearly attributable to the Fed’s statement that there were significant downside risks to the economy and a strain in global financial markets. European markets fell sharply andShanghaiandHong Kong’s indices set new 52-week lows.

On Friday, the market stabilized with small gains in each of the major indices. Advancing stocks were ahead of decliners by about 2-to-1. And volume for the NYSE totaled 1.2 billion shares, the best for an advancing day in two weeks. But the technical damage inflicted on the major indices has been enormous.

The Dow’s chart clearly shows the impact of the Fed’s statement on Thursday. The plunge through the support line (lower red dashes) broke a seven-week bearish flag formation confirming that the Dow Theory bear market signal flashed several weeks ago was genuine. And the turn down from its 50-day moving average (blue line) adds verification along with a sell signal from the stochastic. However, despite the crush of selling, the Dow held at two important support lines — the closing low at 10,720 and the low of the year at 10,597.

The S&P 500’s performance and results were much like the Dow’s with the exception that the weekly low was not quite so pronounced as the Dow’s. But like it there are two support numbers that, if broken, would send the index much lower: The initial support at the closing low of 1,120 and low of the year at 1,101.

The Nasdaq has not broken its bearish flag. Thursday’s sell-off drove the index to the support line of the flag at 2,420, and so that is its initial support number with the final support at the closing low of 2,331. In the event of a rally, initial resistance is at the top of the gap at 2,494. Note the strong sell signal from the stochastic.

The stock market has been under enormous pressure for over two months, which is graphically illustrated by the CBOE Volatility Index (VIX). Note that the spike in volatility in March from the Japanese earthquake resulted in a jump to just over 30. But since August, the VIX has fluctuated violently between 30 and 45. This is an unusual level of sustained volatility and often the precursor of a violent market decline like that seen last summer and at the beginning of the final decline of the 2008 bear market in October of that year.

Finally, note that the rush to sell wasn’t confined to just U.S.stocks. The iShares MSCI Emerging Markets Index (NYSE:EEM) broke down from a triple-bottom with a new breakaway gap on high volume. But lest anyone conclude that this could be a selling climax, note that the initial break in early August of its major support line was accompanied by three days of very high volume, and the current break’s volume appears to be still building.

Conclusion: The daily economic news has had an enormous impact on stocks, andEurope’s economic woes are not improving. This weekend the press was reporting that European leaders have accepted the fact that a default byGreece cannot be avoided and thatItaly is in more serious trouble than first reported.

On Saturday, Portugal’s prime minister said that its economy is expected to shrink by 2.3%., according to The Wall Street Journal. After a week of economic turmoil, the stock market is oversold and probably due for a bounce, but margin calls will be due today, so look for a continuation of the downtrend even if bargain hunters dominate the opening.

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: Clues to Spot When a Bottom Is Forming
• See Sam Collins’ Trade of the Day: How to Play Lexmark’s Next Sell-off