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Friday Recap

The U.S. has turned into a "must borrow maniac." Listen to this paragraph from Tom Donlan of Barron's earlier in the week: "This is a country that is $16.7 trillion in debt. It must borrow about $700 billion in the next 12 months to keep doing what it did last year. It must borrow more than $5 trillion in the next ten years. It must borrow more than $14 trillion over the next twenty-five years. None of these projections consider inflation or the possibility of higher interest rates, or slower GDP growth, or longer life expectancies, or new spending programs."

Global equities turned higher again today. Some are crediting President Obama's nomination of Janet Yellen as the next Fed chair, as well as the encouraging Washington headlines, albeit a short-term fix. President Obama along with fellow Democrats and the Republicans are now constructing a short-term fix that will get the government up and running again while agreeing to lift the debt ceiling through Nov. 22. Hopefully we will not have a rerun of the same dysfunction that we have witnessed too many times as it is while the U.S. economy is crawling along.

The next FOMC meetings are scheduled for Oct. 29-30, Dec. 17-18, Jan. 28-29 and March 18-19, with the newly negotiated extension of the debt ceiling to Nov. 22 sandwiched right in the middle of the next two meetings - with the tapering commencement to begin as early as ...? The six-week extension is in front of the Thanksgiving holiday - some headlines set the taper as early as the Dec FOMC meeting. The December meeting will be Ben Bernanke's last meeting while Janet Yellen will preside over her first meeting in January 2014. Will either chair be willing to pull the trigger on their way out/in? Data-dependent ...

Today started with 265k ESZ and 1.2k SPZ traded on Globex, ESZ trading range was 1689 - 1673. Thursday's regular trading hours (RTH's), SPZ pit session trading range was 1687.00 - 1667.30 before settling at 1685.00, up 36.2 handles. Michigan sentiment index checked in at 75.2. Banks were mixed to higher following WFC and JPM earnings pre-market and next week brings more bank earnings as earnings season picks up in earnest.

Today's December S&P 500 (SPZ) pit session opened fractionally lower at 1684.70 - 1684.00, traded an early low of 1683.00 before stepping higher through the morning, printing an intraday high of 1698.50 at 12:08. Following yesterday's 16% decline in the VIX, the fear gauge was more sanguine, trading either side of 16 area, down 5%. The opening hour saw steady volume that tapered off during the midday grind, holding the 1685.50 area on the downside retest, and traded sideways to higher with only minor retraces as traders awaited word that the politicos had inked the short-term deal.

Michigan Sentiment checked in at 75.2 vs exp of 75.6 - its lowest reading since January 2013. There has been chatter of the surging transports, airlines and railways back on the all-time highs and something to keep an eye on going forward. If they manufacture, produce or just ship it - people are buying it and they have to transport it somehow.

Friday afternoon, no one around, as the indices marked time trading sideways in the upper end of the day's range. The SPZ was trading in the 1695 area when the early look of the closing imbalance showed (14:00) MiM - MrTopStep Imbalance Meter at 57%, a very small $70M to the buy side, followed by a read of $145M at 2:47. The cash close traded 1697.60 area before the index made a new daily high of 1699.30 in the closing range and settling at 1699.00, up 14 handles. Last Friday settled at 1684.80, but what a week in the middle we had!

As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video found under the OptionsTV page (top bar). We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow.

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