After several weeks on the back pages of newspapers, on Friday the Greek sovereign debt problem resurfaced and the Dow was stripped of triple digits on the opening. And the downgrading of 37 Italian banks by S&P added to the uncertainty. After a month without triple-digit losses, traders at first appeared shaken, but a late rally pared losses to the double digits. Most commentators attributed the European financial news as a catalyst for selling following wide reporting of the U.S. market’s overbought condition from the view of technical analysis.

At the close, the Dow Jones Industrial Average fell 89 points to 12,802, the S&P 500 lost 9 points to close at 1,343, and the Nasdaq was off 23 points to 2,904. The Big Board traded 750 million shares while the Nasdaq crossed 467 million, and decliners outnumbered advancers by 3-to-1 on both exchanges.

Even though the indices rallied back from triple-digit losses on the Dow on Friday, the day must be considered as a minor reversal down day since the close was lower than Thursday’s low. Internal indicators are grossly overbought, and thus a pullback is in order. The first zone of support for the 500 is at the 1,322-1,333 zone. The bottom of the zone intersects exactly with the sharp red-dashed trend line and the green (hard to see) 20-day moving average and calculates to a 2.4% decline from Thursday’s high of 1,354. The next support zone is at a major point, the Oct. 27 and Jan. 10 and 12 highs-a fall to 1,292 = a 4.6% decline from 1,354. Resistance is at the July high of 1,356.

The Dow’s chart is very similar to the S&P 500’s. The initial support is at an average of the July highs at 12,750 and the red-dashed support line and the more obscure 20-day moving average 12,715. The next support is at 12,535, and then the major support line is at the October high of 12,300.

For a comparable chart of the Nasdaq, please see Friday’s DTA.

Friday’s reversal was no doubt the result of unrest in Greece, and while I was writing this last night, the situation there appeared to worsen. The near-term trend could see a minor pullback within the overall uptrend. Our internal indicators have been warning of a correction for several weeks, and so Friday’s minor turnback should be no surprise. In fact, prices have achieved rather lofty levels, and a pullback would give us an opportunity to grab some higher-yielding favorites, as well as technology stocks that are due for a correction at prices that could provide double-digit returns.

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.