The U.S. dollar was strong against the euro again yesterday, as chances increased that Greece’s government would not live up to the previous agreements with the eurozone. Depositors withdrew 700 million euros from local banks on Monday.

The continuing turmoil raised the pressure on other Europeans to do the same. Headlines across Europe increased worries of another major crisis. Thus the DJIA fell 63 points to 12,632, the S&P 500 fell 8 to 1,331, and the Nasdaq lost 9 points to close at 2,894. Volume on the Big Board totaled 868 million shares, and the Nasdaq crossed 465 million. Decliners on the NYSE exceeded advancers by 2-to-1 and on Nasdaq decliners were ahead by 1.2-to-1.

For the first time since January, the CBOE Volatility Index broke above 22. Such an increase in the VIX usually leads to more volatility, and in a down market that could be telling us that an acceleration of the decline is about to begin.

One of our readers, Mike, asked that I run a five-year chart of the N.Y. Composite (NYA), a broad index that includes all stocks on the NYSE. The upper trend line is drawn from the October 2007 high to the highs of 2011 and 2012. The index appears to have begun to roll over in April and now has confirmed a failure to penetrate the major downtrend line. Note the lower line which results in a broad downward channel with support somewhere around 6,000 around the end of this year. All our readers’ comments are appreciated.

On Monday, we examined the breakdown of the S&P 500 with a downside target of 1,264 to 1,292. Yesterday’s 63-point decline in the Dow confirmed a breakdown from a triple top. By closing under the support line at 12,716, the index established a lower low; and subtracting that from the April high of 13,331 equals 615 points. And 12,716 minus 615 equals 12,101 — the likely maximum target of the current decline. The October high also could provide some support, and so the decline could find support between those two numbers, 12,101 and 12,300. Note that the 200-day moving average at 12,198 is about midway in the range.

Conclusion: The market has entered a new phase with major indices confirming that both the near and intermediate trends are now pointing down. The long-term trend still is up. The bears have temporarily taken charge of the broader markets but have not yet turned the overall trend to their favor. All of our internal and sentiment indicators are now grossly oversold. And with the reason for the breakdown being the turmoil in the eurozone, any positive change there could result in a vicious rebound. Traders should be playing the short side of the market but with protective shorts in place to prevent a whipsaw to the upside.

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.