A downgrade of Greek bonds and disappointment over U.S. economic reports resulted in the worst day for the market since August 2010. But is yesterday’s selling a one-day phenomenon or a warning that the market is headed lower?

After breaking above the bull flag and its 20-day and 50-day moving averages and holding for a day, the S&P 500 reversed course on relatively high volume and on breadth of about 5-to-1. The sell-off not only took back all of the gains of the last few days, but threatens to break the S&P 500’s broad base at 1,302 to 1,332 and the intermediate trendline (red dash line) at 1,305. In order to reverse this new round of selling, and reaffirm the bullish flag, the S&P 500 must close above 1,345, which was the intraday high on Tuesday. A continuation of selling could threaten the March low at 1,249 and the overall uptrend.

Throughout the year, the weakest sector has been the financials, and yesterday was no exception.

The Financial Select Sector SPDR (NYSE: XLF) has broken the important 200-day moving average, confirming to many that a bear market exists in that sector. Support, however, begins at around $15 and extends down to $14, but there is no assurance that this support will hold. Note the new sell signal on the stochastic indicator.

Conclusion: Until the major indices, as represented by the S&P 500, are able to negate yesterday’s strong sell-off and move out of the bullish flag, we must revert back to the stance of a cautious bull. Currently, it looks like it’s going to be a long summer.

For one stock to buy now, see the Trade of the Day.

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.