European markets bounced up after decline on Monday by almost 5%, US futures erase losses after relatively weak Tuesday start. Solid buying momentum in European session appears to be driven purely by technical forces rather than incoming information as “buy the dip” mood still remains largely unaffected despite drawdowns. USD run out of arguments at 93.90 level, where it made a U-turn giving up almost all intraday advantage.

Looking at the SPX futures, it is difficult to claim that bears are done. The sellers had an important event yesterday - breakout of the 3300 level (which they had been trying since September 9), after which, as we can see, they managed to gain a foothold below. Looks like a strengthening of the initiative:

Analyzing the news background, it is important to notice subtle drift away from the Fed policy (which basically said that it’s done with policy easing) to other sources of bullish clues. In my view, next big bullish surprise should be expected from the news regarding development and results of clinical trials of Covid vaccines (currently more than 30 candidates) as some of them are already in the last phase of testing. UBS analysis found that more than 40% of the gains in the stock market were driven by vaccine expectations. And no wonder - the head of the Fed Jay Powell, at almost every meeting since the beginning of the pandemic, said that the path of US recovery is highly uncertain due to the virus.

However, according to early read, the first clinical efficacy results of major vaccine developers, such as Moderna, Pfizer, Novavax, Astra Zeneca, Johnson & Johnson, will be available only in October-November. It is important to understand that for now, there are a few bullish drivers apart of risk-taking mood which can offer support to the broad market.

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