This is the main conclusion from today’s morning letter, which you can read to register to receive in your inbox every morning, along with:
Share prices have risen sharply after the decline in early August.
In the two weeks following the August 5 low, the S&P 500’s market cap grew by $3.7 trillion, with $1.6 trillion of that growth coming from the “Magnificent Seven” stocks.
While Nvidia (NVDA) and artificial intelligence trading lead the rally, the risk rally is seeing broad participation — even from often-forgotten corners of the market like meme stocks.
Back in May, we outlined Yahoo Finance’s own meme stocks five-day volatility trigger . The list of stocks includes meme stalwarts GameStop (GME) and AMC Entertainment (AMC), along with Carvana (CVNA), Beyond Meat (BYND), Kodak (KODK), Palantir (PLTR) and Coinbase (COIN).
Any up or down moves between members of this group that are greater than three standard deviations, measured over the last quarter, are recorded and aggregated. When there are at least three triggers within a rolling five-day window, a signal is generated.
Since the August 5 low, Carvana, Palantir, Beyond Meat and Coinbase each registered volatility triggers, with the composite signal peaking at 7 on August 9.
(The all-time high — going back to December 2020 — was 14, recorded on January 28, 2021, during the original GameStop frenzy.)
As explained in May, meme stocks were once a reliable opposite signal during the 2022 bear market. Investors chased every incipient rally by bidding up laggards — just before the overall market turned.
But that hasn’t been the case for most of this bull market, as signals have been scattered throughout the price rallies. And recent signals were generated closer to the start of the rally.
In fact, the recent price action in the meme stocks that produced volatility triggers appears to be explained more by idiosyncratic factors and general market volatility than by a latent meme-ishness.
For example, Palantir issued an optimistic profit forecast on August 5, which turned into a loss of 14% at the opening that day, while the yen rose to a loss of 2.6% at the close.
Coinbase’s returns have risen and fallen with the fortunes of crypto and bitcoin recently. And Carvana reported earnings on July 31, leading to a significant rally on August 1 — just before general market turmoil.
One exception might be Beyond Meat, which surged 40% on August 9 for no apparent reason.
The suggestion is made that pure meme trading – those inexplicable rises that defy any fundamental or rational justification – still has a role to play for the modern trader.
Click here for the latest stock market news and in-depth analysis, including events that affect stock prices
Read the latest financial and business news from Yahoo Finance
