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Preoccupied with Gloom, Market Missing Two Big Bull Catalysts

On Monday investors were again buckling up and preparing for a rough ride, with another negative headline out of Europe triggering more jitters.

This time the trouble came out of Italy, with reports suggesting Prime Minister Silvio Berlusconiwas struggling to hang on to power ahead of a key parliamentary vote on budget reforms.

Markets are extremely sensitive to headlines from Europe, with the Dow and S&P changing directions like the wind, as developments in the region come and go.

“Don’t expect to see many single stock stories in this market,” says trader Steve Grasso. “As Europe goes, so goes our entire market.”

And Europe worries abound.

The latest data out of Berlin showed Germany’s industrial output fell in September at its sharpest rate since February 2009, fuelling concerns that Europe's stuttering growth engine could go into reverse before the end of 2011 as an abrupt slowdown abroad eats into demand for its exports.

”I think we’re looking at a recession in Europe and continued austerity could mean a serious recession," says trader Brian Kelly.

As gloomy as all that sounds, headlines out of Europe could take a positive turn quickly. Leaders say they're going to fast track details on the ESFS, suggesting the program could be up and running in as little as 4 weeks.

If Europe starts to show any signs of stability our pros think there are two strong catalysts that could influence the market and both of them are bullish.

1. Results over the past earnings season have been relatively strong.

”That’s the only thing that keeps me in the market,” says trader Stephen Weiss. “But with earnings going up and the S&P basically flat on year, money pros could put money to work, here in US equities.”

Trader Steve Grasso feels the same. “It’s earnings that gives investors the fortitude to play this market. There’s a real fear of missing the next leg higher.”

2. China CPI may be weaker than expected (yes that's bullish)

According to published reports, China's CPI is likely to fall to 5.5 percent in October, due to falling food prices. Data from Beijing shows the wholesale prices of 18 staple vegetables fell 2.2 percent during the last week of October, while prices of pork and eggs dropped by 1 percent and 0.6 percent, respectively.

“If China CPI comes in weaker than expected – the market will probably take it that Beijing is on the brink of easing,” says trader Brian Kelly. And that’s bullish.



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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; Kelly is long VLO; Najarian is long CDE; Najarian is long CIGX; Najarian is long CME; Najarian is long CBOE; Najarian has long call spreads PHM; Najarian has long call spreads MS; Najarian has long call spreads PBI; Najarian has long call spreads AMGN; Weiss owns EUO; Weiss owns KO; Weiss owns WLP; Weiss owns KEG; Weiss owns RIG; Weiss is short TCK

For Steve Grasso
Stuart Frankel & Co and it’s partners own (CSCO)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSP)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own MET
Stuart Frankel & Co and it’s partners own MU
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own UAL
Stuart Frankel & Co and it’s partners own XRX

For Brian Kelly
Shelter Harbor Capital is long GLD
Shelter Harbor Capital is long OIL
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Shelter Harbor Capital is long MOO
Shelter Harbor Capital is long JJF
Shelter Harbor Capital is long Soybeans
Shelter Harbor Capital is long NLY
Shelter Harbor Capital is short Euro-Stoxx futures
Shelter Harbor Capital is short CAD
Shelter Harbor Capital is short Swiss Franc

For Louise Cooper
No disclosures

For Josh Levin
Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Toll Brothers.
Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from Toll Brothers in the past 12 months.
Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Toll Brothers.
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For Scot Ciccarelli
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CNBC.com with wires.