What the Gamestop meme mania tells about where we are in the market cycle

Oscar Wilde famously said: “I can resist anything except temptation.”

Anyone involved in markets is tempted to put down a stake in the latest Gamestop trading insanity. It’s not just them either as the usual suspects have been re-assembled. Here are the latest pre-market moves:

• GME +127%
• AMC: +121%
• SPWR: +135%
• KOSS: +40%
• BB: +25%

It’s insanity. The takes about efficient markets are already tired and it’s now clear that we’re simply in a meme-driven market. It wasn’t just the pandemic, there’s something about modern communication and Reddit that makes people want to play this game.

Something about it seems so easy and lovely and fun, particularly for the newly-minted millionaires who took long-shot 0DE option bets in the past 48 hours. Fair play to them.

The seduction of easy, life-changing money is real. But if you can resist it (and listen, you missed it anyway), then just wait. There will be another trade just like in weeks or months.

So what is the real takeaway?

I expect this will unleash some of the animal spirits in markets. Now some of those are already at work but — as today shows — markets can get out of hand. Compounding that would be a dovish pivot from the Fed, something that could start to fall into place with a low CPI report tomorrow.

Keep this in mind: The last GME mania was in January 2021. Despite the bust in GME that month, the S&P 500 rose for 7 straight months afterwards and didn’t peak until the following January; rising 29% in that time.

This article was written by Adam Button at www.forexlive.com.