Will Italy Break the Backs of US Bulls?

Remember when chatter on the floor suggested the Street was growing optimistic about – well, everything. That was sooo yesterday. No we mean that literally.It was yesterday.

The mood in the market seems to change with the wind – or at least change with the headlines out of Europe.

And on Wednesday the headlines generated not only chatter about how low the S&P could go – but if Italy had broken the back of the bulls, entirely.

Specifically, Italian bond yields shot up to 7.502 percent, a new high since the euro was introduced in 1999, as investors unloaded the debt after a clearing house increased margin calls.

That’s a problem because Portugal and Ireland were forced to seek bailouts when their borrowing costs reached similar levels

"We just added another layer of uncertainty. The issue with Italy brings the region closer to a broader negative scenario and raises more concerns about a financial crisis," says Bob Pavlik, the chief market strategist at Banyan Partners in a Reuters interview.

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”It’s hard exaggerate just how important these developments are,” says trader Steve Cortes. "This looks like the first inning of a long and ugly game for international markets."

“The spike in bond yields is concerning and serious,” Brian Kelly concurs. "I don't think the ECB is going to buy their bonds."

Although the ripple is complex, largely concern is that the European financial system will start to freeze – with financial firms afraid of contagion. And the resulting contraction, could trigger a serious economic downturn.

”I’m short the euro, Deutsche Bank and Santander,” says Steve Cortes. “This isn’t over.”

"The pattern in the US has been sell in the morning and buy in the afternoon," adds Brian Kelly, but if that doesn’t happen on Wednesday, get short, very short."

In other words, this could be a game changer.

That's not to say there aren't any bulls left in the market - there are - plenty in fact. Pete Najarian is among them - he just doesn't buy all the negativity. "Considering the news, the market could be down, a lot more severely."



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Trader disclosure: On November 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian is long AAPL; Najarian is long AKS calls; Najarian is long C; Najarian is long WFC calls; Najarian is long MS; Najarian is long INTC; Najarian is long YHOO; Najarian is long X calls; Najarian is long HPQ; Najarian is long MSFT; Cortes is long SO; Cortes is long WMT; Cortes is long DNKN; Cortes is long Treasuries; Cortes is short AAPL; Cortes is short XRT; Cortes is short STD; Cortes is short DB; Cortes is short EURO; Cortes is short GOLD

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