Another Meme Stock Rally: To the Moon or a Sign the Party Is About to End?
The recent rally across all asset classes, which led the $S&P 500 Index(.SPX.US$ to its best month in over a year, has finally attracted the attention of retail investors.
"Dash for trash" is heating up
The traders who created the so-called meme-stock mania, with big bets on speculative companies, are back. A mad rush for shares of unprofitable companies and heavily-shorted names has revived talk of a "dash for trash" on Wall Street.
$BYND up 35% over last 5 days as investors dash for trash," Stocktwits, a social platform for investors and traders wrote Monday on X.
Shares of the original meme-stock darling surged this week, $GameStop(GME.US$ rallied 42.75% over the past five sessions, $AMC Entertainment(AMC.US$ rose 10.15% in the same period. The stock price of $Coinbase(COIN.US$ has doubled since November.
Retail investors optimism mounts
The latest American Association of Individual Investors survey this week shows that market pessimism has dropped to its lowest level in nearly six years. Bearish sentiment dropped to 19.6%.
Individual investors are "showing optimism and buying into the rally" after a few weeks of economic indicators bolstered overall sentiment, said Jason Goepfert, founder and senior analyst of Sundial Capital Research.
Ultimately, strategists say the "dash for trash" trade is being driven by expectations that the Federal Reserve could cut interest rates as many as five times next year.
Rate cuts often benefit more speculative investments by forcing investors to reach for returns in riskier assets, as so-called defensive assets like bonds become less attractive.
Can the rally continue?
Investors looking for signs the market is hitting a near-term peak in terms of optimism may be getting exactly the message they need from the bubbling excitement among meme-stock traders.
Sentiment readings are contrarian indicators and a high level of bullishness could mean that the market rally may run out of steam soon.
There is the possibility that the dash for trash could signal that 2023's euphoria-driven rally might finally be on the verge of petering out, said Michael O'Rourke, chief market technician at JonesTrading.
Late rallies typically see a dash for trash, as seen in 2021 when gains in meme stocks and bitcoin were rapidly unwound during the selloff in 2022, contributing to the S&P 500's most significant calendar-year decline since 2008.
Source: MarketWatch, Bloomberg, Business Insider
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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DamZhamEnterprise : lol, trashy headline
Mindfield : Beyond meat is a bill gates wannabe baby , it’s not a meme
5060 : meme is a buzzword used by Crooked Ken and the republicans
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