Meme Stock Craze Back in the Spotlight: Are Traders Losing Patience? | chart watcher

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

It’s a big week in the stock market. But the trading frenzy that surfaced during the pandemic looks set to return, at least for a while. It’s as if there’s a camp that doesn’t care about inflation data, earnings from big retailers Home Depot (HD) and Walmart (WMT), and April retail sales data.

Broader stock markets may not move much until the data is released. Despite the CBOE Volatility Index ($VIX) rising today, volatility remains low. The market is trending towards the bullish side. Looking at the daily chart of the S&P 500 ($SPX), the index is relatively flat today, but the NYSE Advance-Decline and S&P Advance-Decline lines are trending upward. This indicates that bullish sentiment is slightly stronger than bearish sentiment.

Chart 1. Market breadth and S&P 500 index. The S&P 500 is near an all-time high and the rising downtrend is trending upward. Will the market break through all-time highs or become resistance? Chart source: StockCharts.com. For educational purposes.

near and far

The S&P 500, Dow Jones Industrial Average ($INDU), and Nasdaq Composite ($COMPQ) are near all-time highs. Given recent market movements, it would be natural to expect the index to retest its highs. It feels as if the mayor wants to do something but is hesitating. You want to know the CPI numbers before you decide to break the high or move in the opposite direction.

Indecisive markets make it difficult for traders to take positions. Most seem to be waiting on the sidelines, keeping the powder dry. While institutional traders wait, retail traders have jumped in and taken interest in stocks that have been popular during the pandemic, bringing some excitement to the stock market.

Are Meme-Stocks trendy again?

If you’ve focused all your energy on watching the movements of the broader market, you may have missed the excitement of “meme stock land.” Remember Gamestop (GME) and AMC Entertainment (AMC)? Well, they created some excitement in the market today. GME is up 74.4% and AMC is up 78.35%. It’s amazing how a viral social media post can affect stock prices! GME and AMC were the biggest gainers on the NYSE.

Figure 2. AMC and GME top the list of market leaders. Both stocks closed more than 70% higher in Monday trading. This brought excitement to the otherwise boring stock market. Chart source: StockCharts.com. For educational purposes.

takeout

Does this mean the era of meme-stock is back? Well, if the broader market continues to be indecisive and move sideways, you can’t blame traders for turning to more interesting avenues. But unless the market surprises us, life expectancy is likely to be shorter than in the past. It may continue to move sideways or trend downward after Wednesday’s CPI report. We’ll 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. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.