As expected, US equities extend their pullback to more comfortable buying levels. After the red session on Wednesday, S&P500 futures continued their decline on Thursday, erasing 0.5% at the time of writing. Nasdaq futures meanwhile, declined more aggressively, losing more than 1%. European stock indices have made a leap down, losses exceed 1.5% as the situation with the virus deteriorates, requiring more and more stringent measures.
Mixed reporting by banks in the US, fading of remaining hopes for any kind of stimulus package for the US economy ahead of the elections, the stubbornness of the virus and a lack of news on vaccine testing contributed to the sell-off in the market. Even with Biden's lead, skepticism about the veracity and reliability of the polls is justified given the surprising outcome of elections in 2016.
Nevertheless, if Trump manages to overcome the current deficit in the polls (as much as 10 points) and win the election, this will be the largest outsider victory since the Second World War:
Source: Deutsche Bank
Simply put, from a historical perspective, Trump's lag is significant and suggests that the probability of the incumbent’s win is not so high.
Actually, this is why the markets feel good, perhaps focusing not just on Biden's victory, but on a Democratic Sweep - the presidency plus getting a majority in both houses of the Congress. However, this week, the likelihood of such an outcome has stabilized after a sharp rise in late September - early November:
As I wrote earlier , a healthy correction was necessary in order to focus on further rally as the deviation from the uptrend in SPX became more and more extreme (price - 200-DMA difference). Now, when the distance is shrinking and favorable prospects remain in place due to the high chances of Democrats, the level of 3440-3450 on the index looks an attractive area for long positions.