Looking at recent volatility, especially vigorous move to the upside, stock markets could rally on hopes that fiscal deal will be approved before the elections. But on Tuesday, much hoped talks fell through once again. House Speaker Pelosi and Mnuchin still “hold hope” and continue tense negotiations almost 24/7, but rumors suggest that there is no progress on key differences. Reuters reported that the GOP’s head in the Senate Mitch McConnell would not want to approved aid before the elections.

The SPX was unable to sustain gains, bouncing down from the level of 3500 last week, without much upside impulses this week. The slide was accompanied by a sharp decline of the odds of Democratic sweep outcome:

On the hourly chart we see that 200-day SMA test failed, but on October 19 the market gave up important support:

Now the battle unfolds for the horizontal level of 3420. It has sustained multiple tests so far due to weak sellers’ indecision, but chances are good that we will go lower with 50-day MA on the daily chart (the next important support at 3400) as the next target. Depending on the struggle at the level it will be seen whether the prospects remain to switch quickly to the growth. Accordingly, there is an opportunity for a near-term short trade, and a pause is assumed for buyers, since they can wait for more discount.

The dollar sold heavily in line with the ideas set forth in my Monday post. The tests of 93.00 and 92.76 levels have been successfully complete and, in my view, it is time to correct upwards with potential entries in the 92.70 - 92.45 area. For EURUSD, this should be the zone 1.1890 - 1.19160:

The reason is potential downside in the US stock market.

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