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The bulls are everywhere! I'm seeing bulls everywhere I look - well, almost everywhere.
The big exceptions would be the bond market, as tracked by the iShares 20-Year Treasury Bond ETF (NASDAQ: TLT), which is busy creating lower highs and lower lows, and the U.S. dollar, as tracked by the Invesco DB Dollar Index Bullish Fund (NYSEArca: UUP).
Those two corners of the market are in bearish trends right now, but as we know, that's only bullish news for stocks.
Why the bullish trend? After all, it's Friday morning as I write this and we still don't have a definitive winner of the presidential election. Biden appears to be ahead, but still, anything could happen.
Well, there are a couple of things driving the markets higher, and one "driver" in particular is pointing at a trade that's too good to pass up.
Let's make some easy money...
Why the Bulls Are Running Wild
You'd think the markets would be trading flat or down at a time like this - in fact, they are down ever so slightly this morning on some downbeat jobs data - but Wall Street has just executed a fast pivot.
The big money had been betting heavily on the "Blue Wave," which, for Wall Street, was really "a juicy 'reflation' trade."
The "reflation trade" is really just a bet on big fiscal expansion - expansion causes growth and inflation, inflation weakens the dollar, the weakening dollar strengthens stocks. That's "reflation" in a nutshell.
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And sure, fiscal expansion was most definitely on the agenda for the Democrats... had they swept the elections.
But as we know now, that sweep hasn't materialized.
The election is coming down to the wire, and while the Democrats are favored to win the White House and keep the House of Representatives, it'll be January before two Georgia runoff elections give them a shot at controlling the Senate, too.
This did ding markets in the overnight on Tuesday into Wednesday, but not as much as it could have. Wall Street checked the weather report and decided a divided government - which is what we'll get if projections and trends hold up - is the next best thing.
Wall Street has calculated that we won't see the kinds of heavy taxation or regulation we might otherwise expect, and that's got folks buying.
On top of this, we're entering into what the Money Calendar tells me is an extremely strong seasonal bullish trend. It's probably going to look a lot different this year, thanks to the pandemic, but we will still have a holiday shopping season.
As for Wall Street's foot soldiers and head honchos, it's coming up on year-end bonus time - and nothing succeeds like success.
Throw in the growing prospects of stimulus once we get some resolution to the election, and you've got some pretty powerful ingredients here for a continued rally.
That said, there's one note of caution: We could see some big moves to the downside if we get the "contested election" the pundits have been warning us could happen. I'm not sure how far that contest could go, legally, or whether we'll even see that kind of scenario - right now, we don't even have a result to argue about. But it's something to be aware of.
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Then again, the proper position sizing and risk management I always recommend is good for mitigating all kinds of trouble.
And that, folks, brings us to today's bullish trade...
These Predictions Have Been Right on the Money
This screen grab from the Money Calendar, my proprietary tool that takes 10 years' worth of data on the 250 best stocks and exchange-traded funds on the market and crunches it to point out trades, has more or less predicted the exact action we've seen this past week.
We've had a mostly bullish week, and you can see today, Friday, is just a tad more bearish...
But look at what happens further and further into November...
We see that strong seasonality bring out many more bullish opportunities.
Now, I've got to save my best recommendations for my paid subscribers - that's only fair - but I'm still sharing one killer trade with all of you today.
Alibaba Group Holdings Inc. (NYSE: BABA) is one of the week's best bullish bets. Why? The Money Calendar shows that, since it was listed, during the period beginning Nov. 9, bullish 10-day bets on Alibaba have paid off more than 90% of the time.
In other words, historical data shows us that this coming week is the right time to go long on BABA.
It makes good sense. This is one of the biggest Chinese "e-tailers" out there, and China's had a healthy recovery. Alibaba is also in the middle of seasonally strong global retail trends.
So what's the play?
Well, as luck would have it, BABA happens to be one of the most expensive optionable stocks out there; it's expensive to buy calls, which again makes sense given how bullish this company is.
You could sell puts, which would be cheaper, but selling naked puts is an extremely risky strategy I don't recommend for just anybody.
The smart move here is a relatively inexpensive, low-risk BABA credit spread that will enable us to sell premium.
You could buy a Nov. 20, 2020 BABA $295 put and simultaneously sell a Nov. 20, 2020 $305 put. This will allow you to collect a net credit while capping your downside risk.
If BABA rallies to $305 by Nov. 20, you keep the credit. These kinds of spreads are a great way to profit if you're bullish for the next few days or weeks but want to keep your risk low.
And Alibaba's not the only great play right now, either. Some are even better.
My friend and colleague Shah Gilani just named three stocks he says are "screaming buys" right now.
All of them are trading at a discount, but, just as good, are flying "under the radar"; most people have never heard of them.
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About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.