Meme Stock Frenzy Back In the Spotlight: Are Traders Losing Patience?

It’s CPI and PPI week, and traders seem to be waiting for the data before making investment decisions. While that’s happening, surprising action is brewing in meme stocks. Are traders getting tired of this indecisive stock market? 

It’s an important week in the stock market. Yet, the trading frenzy that surfaced during the pandemic seems to be coming back, at least for a short while. It’s almost as if there’s a camp that doesn’t care about inflation data, earnings from big-box retailers Home Depot (HD) and Walmart (WMT), or April retail sales data. 

Until the data is released, the broader stock market may not move much. Volatility is still low even though the CBOE Volatility Index ($VIX) ticked higher today. Market breadth is leaning toward the bullish side. The daily chart of the S&P 500 ($SPX) shows that even though the index was relatively flat today, the NYSE Advance-Decline and S&P Advance-Decline lines are trending higher. This indicates that bullish sentiment is slightly stronger than its bearish counterpart.

CHART 1. MARKET BREADTH AND THE S&P 500 INDEX. The S&P 500 is close to its all-time high, and the Advance-Decline line is trending higher. Will the market break through its all-time highs or will it be a resistance? Chart source: StockCharts.com. For educational purposes.

So Close, Yet So Far

The S&P 500, Dow Jones Industrial Average ($INDU), and Nasdaq Composite ($COMPQ) are close to their all-time highs. Given recent market action, it’s natural to expect the indexes to retest the highs. It feels as if that’s what the market wants to do but is hesitating. It wants to know the CPI number before deciding to break through the highs or move in the opposite direction.

An indecisive market makes it difficult for traders to place positions. Most seem to be waiting on the sidelines, keeping their powder dry. While the institutional traders were waiting, retail traders jumped in and brought some excitement to the stock market by bringing attention to the stocks that were popular during the pandemic.

Meme-Stocks Back In Vogue?

If you focused all your energy on watching the action in the broader market, you would have missed the excitement in “meme stock land.” Remember Gamestop (GME) and AMC Entertainment (AMC)? Well, they sparked some excitement in the market today. GME was up 74.4%, and AMC was up 78.35%. What a social media post that went viral can do to a stock’s price is amazing! GME and AMC had the highest % up moves of stocks in the NYSE.

FIGURE 2. AMC AND GME TOP THE LIST OF MARKET MOVERS. Both stocks closed higher by over 70% in Monday’s trading. This brought excitement to an otherwise dull stock market. Chart source: StockCharts.com. For educational purposes.

The Takeaway

Does this mean the meme-stock era is back? Well, if the broader market continues its indecisive, sideways moves, you can’t blame traders for turning to more exciting avenues. But there’s a chance it could be more short-lived than in the past unless the market surprises us. It could continue its sideways move or trend lower after Wednesday’s CPI report. We’ll just have to wait until Wednesday morning to find out.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.