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Key S&P Levels as Market Wrestles with Europe Ups & Downs

Again the latest headlines out of Europe dominated the US market with negative headlines in the morning dragging down stocks and positive news in the afternoon driving gains.

At the open investors were confronted with reports out of Italy which said Prime Minister Silvio Berlusconi was struggling to hang on to power ahead of a key parliamentary vote on budget reforms.

But then late in the session, stocks bounced after Juergen Stark, a member of the European Central Bank's Executive Board predicted the overseas financial crisis would be resolved within 2 years.

"Given the overhang that Europe has been having on equities, stocks are going to be subject to intraday moves based on innuendo or conjecture as much as fact," explains Mark Luschini, chief investment strategist at Janney Montgomery Scott in a Reuters interview.

"Any news that's viewed positively is going to move the market, but I don't trust the move. We could just as easily fall back down."

All things considered, what’s next?

“We’re in a cluster of important S&P levels,” says Fast Money trader Steve Grasso. In fact both he and trader Guy Adami suggest watching the technicals, as a ‘tell’ that could signal whether the market is breaking out, or falling apart.

”1257 carries a lot of weight because it’s flat on year,” Grasso explains.

But perhaps more important are the 200-day and 50-day.

On the upside, the 200-day is about 1275, explains Ari Wald Chief Technical Analyst Brown Brothers Harriman. He calls that level a true test for the bulls.

”We failed at the 200-day at end of October. A second failed attempt would signal trouble,” he says.

On the downside, the 50-day, which is around 1200 seems like support, Wald explains. “If we fall below that level – it’s a weak technical line up that would bring the bears back in force.”

So what’s more likely?

In the near term, the pros think the path of least resistance is higher.

”We’re making higher lows,” Grasso adds. “I think the market wants to go to 1300 or above – I had been a market skeptic but I’m feeling better.”

Guy Adami who remains bearish long-term agrees in the short term the market could be spring loaded. “We had an outside reversal month in October so technically the market looks fantastic!”

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Trader disclosure: On Nov 7, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Grasso owns AA; Grasso owns AKS; Grasso owns ASTM; Grasso owns BA; Grasso owns BAC; Grasso owns D; Grasso owns KEG; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU; Adami Owns AGU; Adami Owns C; Adami Owns GS; Adami Owns INTC; Adami Owns MSFT; Adami Owns NUE; Adami Owns BTU; Terranova is long CAT; Terranova is long CVI; Terranova is long VRTS; Terranova is long APC; Terranova is long F; Terranova is long EMC; Terranova is long AAPL; Terranova is long IBM; Terranova is long JOYG; Terranova is long LULU; Finerman owns AAPL; Finerman owns BAC; Finerman owns MSFT; Finerman owns GOOG; Finerman’s firm owns AAPL short calls; Finerman’s firm owns JPM; Finerman’s firm owns YHOO short calls; Finerman’s firm owns IBM short calls; Finerman’s firm owns MSFT

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