Technicals, Euro Debt Fears Driving This Market

Trigger-happy investors dumped stocks on Thursday, scared by the market's sudden fall through a key technical level brought on by more worries about Europe's sovereign debt troubles. Investors have been increasingly focused on Europe, and markets were cautious early as bond yields in Spain and Italy rose to levels viewed as unsustainable.

“There is no place to hide,” renowned currency and commodities trader Dennis Gartman said. “They took everything out to the woodshed and hit everything hard.”

Trader Joe Terranova agreed, adding some of the things that had worked, like oil , weren’t working anymore. To him, the market is absent of a catalyst. News that housing starts slipped less than expected in October was promising, but Terranova noted it wasn’t enough to move the markets to the upside.

The S&P 500 steadily slipped through the morning until it broke through 1,225, when selling picked up in both the futures and cash markets. The fall around midday was swift and volume picked up once the 1,225 level was breached. About 2.83 million S&P E-Mini futures contracts traded on Thursday, with nearly 250,000 changing hands in an unusually busy 15-minute period when the market fell more than 1 percent.

The S&P struggled to break above 1,225 in August and September before piercing it on the way to a two-month high in late October. Computer-generated trading usually uses previous clusters of buying and selling as triggers.

Trader Tim Seymour thought the market did a good job considering it managed to hold 1,205, a key level that traders are looking at. Seymour, founder of EmergingMoney.com, noted 1,205 is the old resistance level from the August 31 rally.

To trader Guy Adami, 1,225 has been the pivot level. Considering it feels as though things in Europe are going to get worse before they get better, he thinks 1,180 is the level to the downside. A close above 1,225 would be encouraging, but he doesn’t think it’s likely.

Meanwhile, gold settled down at $1,720 an ounce on debt contagion fears, even though the precious metal typically rises during times of economic uncertainty. The trade is tough to explain, Gartman said, but it seems the market is trading on various rumors.

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CNBC.com with wires, including Reuters