The "jingle" from the Congress, Treasury and the US administration about coronavirus aid was hollow again. Controversial messages culminated in Trump's trash talk in Twitter that Democrats want to hand out cash to Democratic states - poorly run and with high crime rates. Who would doubt that the fiscal deal is nothing more than a convenient opportunity to please traditional and potential voters and earn extra political points. The horse trading that we observe looks like attempts to hog the covers.

As long as the harm from delaying the aid (i.e. wrath of constituents) does not outweigh the expected political gain from striking a deal with an opposing party, it makes sense to delay it. There is no urgent need, judging by the US labor market data and retail sales, yet. Democrats can deliberately pursue disadvantageous for the GOP channels of cash distribution, based on Biden's lead in polls.

It is not entirely clear why futures reacted up yesterday after so many promises and hopes, but awareness came quickly. The test of 3400 level in SPX futures, which we discussed yesterday, is almost complete, the USD is correcting upward, also in line with yesterday post:

SPX sellers weren’t especially confident or assertive yesterday, but this is just the first test of important level. 200-hour SMA has flipped down but given that the lead of Biden and Democrats in polls has retraced slightly (which drives up the odds of contested elections i), there is little reason to switch to brisk rally and a slightly larger correction and a second test of the 50-SMA are likely.

The situation with the virus in the US continues to be tense, the news front is filled with reports of some kind of new measures there. Europe also actively dampens optimism. I would not be in a hurry to go into longs on the benchmark, even at 3400 level.

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