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The S&P took a beating yesterday. After an initial uptick the S&P fell into a steep decline that was backed by heavy volume and multiple sell programs throughout the day. With a possible budget battle alleviated and the VIX spiking higher and MrTopStep putting out an early imbalance to sell $2 billion in stock on the close, the S&P fell apart late in the day.

We saw the 1786 lows and said there would be a pop back to the 1791-1793 level, but the ESZ had a hard time overcoming the 1791 and after a couple of attempts it was lights out London when the early imbalance showed big for sale.

For today 10 out of 11 markets closed lower in Asia and Europe is trading lower. Today's economic calendar starts out with jobless claims, retail sales, import & export prices, business inventories, quarterly services survey, natural gas inventories and a 30-year bond auction.

Volatility is picking up and it looks like it may stay this way. If the Fed is actually going to taper, things could get ugly fast. Do we think the S&P is going to crash? No! Do we think the S&P will bounce at some point? Yes!!!

Traders are not paid to think. They are paid to react. As Vikram says, Ours is not to question why. Ours is but to sell and buy. The S&P is pulling back as it should at year end. We lean to selling the early rallies and buying weakness. The Ned Davis stats show Friday as an up 19 / down 10 of the last 29 and that falls right into line with the PitBulls Thursday-Friday low the week before the expiration.

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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