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S&P Tests 1200, Banks Take Out October Lows, Say Technicals

It’s been a rough week for the market, with the S&P 500 dropping below 1230, a key technical level.

Persistent worries about Europe's debt crisis led to the worst week for the S&P in two months

Will the selling continue?

Top technical analyst Mary Ann Bartels of Bank Of America Merrill Lynch thinks it probably will.

”The market has tried twice to break the 200-day on the upside at 1271 and failed,” Bartels says. That’s a negative technical sign.

Now she thinks the next test will be at 1200. Although she didn’t say why– 1200 had been a level of resistance in September and then became a level of support in October with the S&P bouncing of the key psychological level on October 17th.

As both a key technical and psychological level, whether the market bounces or breaks at 1200 – will likely inform the next big move.

And Bartels thinks a break is the more likely outcome because “volume has been strong on the move down” – something she considers confirmation.

And ”if we break (charts suggest) the S&P will test a range between 1150 and 1100,” she says, with 1100 the lowest close of the year.

Adding to the negative catalysts, chart patterns suggest to Bartels that the dollar will get stronger. “I think the DXY is going to 80, 81,” she says. Lately a strong dollar has been negative for the S&P because it drags down energy , materials and industrials .

Another piece of the pie can be found in the financials. Bartels says she’s seeing a “technical breakdown in broker dealers and money center banks – "we think  they’re going to take out their October lows.” Not good for the sector.

However, that’s not to say there’s no chance of a rally – there is.

According to Bartells, some kind of resolution in Europe could send bulls off to the races.

“We’d have to get above the 200-day at 1271 – but if we do, then the market could track up to 1350. There’s certainly plenty of cash on the sidelines that could propel the market higher.”

What do you think? We want to know!

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Trader disclosure: On Nov 18, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Weiss owns KO; Weiss owns HPQ; Weiss owns RIMM; Weiss owns EUO; Weiss owns WLP; Karabell owns AAPL; Karabell owns MS; Karabell owns IBM; Grasso owns AKS; Grasso owns AMR; Grasso owns ASTM; Grasso owns AVAV; 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

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CNBC.com with wires.