What Happens To A Meme Deferred?

It is reasonable to ask what is pressuring these stocks and cryptos now. Continued advances require fresh money, and larger stocks require more money than smaller stocks.As the meme stocks grew in value, that meant that they needed to attract more money into the shares to keep them moving higher. Meme stock mania took hold while most of us were in lockdown, and many new investors received stimulus money that could be put to work in high-flying financial instruments. Now we see fiscal stimulus ending and people are returning to work. The influx of easy money is over, and people have more opportunities to spend their money than in months. Without a compelling reason to chase the momentum of hot investments, can they continue to be hot? 

My outlook for all these speculative darlings is unfavorable because it is difficult to envision where the source of fresh investment might be. Most professionals agree that many meme stock valuations are untenable. That means that institutional investors are unlikely to allocate money to these stocks (this does not include index funds who are forced to buy index components). Institutions have been known to trade these stocks, but they are mostly so-called “hot money” that move aggressively into fast-moving situations before moving onto the next trading opportunity. And at this point in the cycle, are there any fresh individual investors who aren’t already familiar with these names? 

As I look at the charts of these stocks, I see declining trends and few potential catalysts. Also, long-term support is well below current levels. The one significant exception is bitcoin, which is perched precariously at the $30,000 level that has proved to be solid support for a period of weeks. Unfortunately, each recent bounce off the current support level has been smaller than the previous one. That is also a worrisome sign for technically oriented traders.

I will end with a song lyric rather than a poem. Neil Young asserted that “It’s better to burn out than to fade away.”I’m not sure if that’s applicable for investments. It can be much easier to exit a fading investment rather than one that is burning out.

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Disclosure: BITCOIN FUTURES

Trading in Bitcoin futures is especially risky and is only for clients with a high risk tolerance and the financial ability to sustain losses. More information ...

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