The U.S. market was roiled by worries over Italy thanks to rising Italian bond yields. Currently everyone believes that Italy is too big to bailout. Yet Europe cannot afford to let Italy crumble as its third largest economy. The situation in Europe is definitely growing more tense. Naturally traders are inclined to hit the sell button first to protect themselves.
We suspect that the S&P 500 index could still find support near 1220 or the 1200 level. Earlier this month the S&P 500 found support near 1215 on November 1st. Readers may want to consider launching bullish positions on a bounce from the 1215-1220 zone. Currently almost 85% of stocks are moving with the major indices so instead of picking individual names you could buy calls on the SPY (S&P500 ETF). If you want to try and get more bang for your buck then look at the small cap Russell 2000 index. The $RUT looks like it should have some support near 712-710. Wait for a bounce from this area (or a bounce from the 700 level if the selling continues) as your entry point to buy calls on the IWM (Russell 2000 ETF).