Peak GameStop?
GameStop volume and volatility have been much lower this week than the previous six days. This also happens with other very short names like Bed Bath and Beyond, Express and AMC.
What is happening?
Chris Murphy, co-head of strategy derived from financial group Susquehanna, pointed out signs that the end of the game may not be far from GameStop: “Recently there are more calls than calls. The open interest in call options it ‘s much lower. There’ s a decrease in volatility. There are indications that Reddit flows are moving elsewhere, like silver. They are certainly signs of maximum GameStop. “
Shares of GameStop fell another 30% in pre-market trading on Tuesday after losing 30% on Monday. Shares traded 37 million shares on Monday, up from a high of nearly 200 million on January 22 and the lightest volume in seven days.
Like the GameStop shorts they claim to have kicked out, many in the Reddit community have already made money and gone out. Some are ideologically committed but hold on for a long time. Others are looking for new opportunities, but Dan Egan, general manager of behavioral finance and investment at Betterment, says it is becoming increasingly difficult to rally troops.
“The human brain yearns for stimulus through change,” he told CNBC’s “ETF Edge” podcast. “One of the real challenges of this kind of thing is that they need to keep their attention on themselves by making things bigger and more unusual. And that’s really hard. … That kind of attention is fractured into other things. that you might have that chance to go up. So you’re looking for silver, other commodities, and so on. “
The problem, of course, is that there is no investment committee, even the debate over silver has been divided into pro-group and anti-group groups.
And this is where the attention starts to blur, Egan said: “A lot of people think this has been a major change in the way the market works, that as long as a message board or a community of people can focus on the attention in a specific stock, they can really move it, it will happen again, but it will be harder, because people will understand that it is a bit of a craze, something of the Ponzi scheme.You need to get in at the right time and get out at the right time … And once you eliminate that ability to focus everyone on the same actions, the possibility of raising the price decreases. “
Does fractured attention mean that the impact of the Reddit community will diminish, or can they come together around some new idea that excites a group large enough to have an impact? Silver, assuming it was such an option, may have been a very poor play.
Eric Balchunas, who covers Bloomberg ETFs, noted in a tweet that the Silver ETF (SLV) had a strong volume but a disappointing price action: “$ SLV was trading at just over $ 7 million today (as was expected), a monster amount and the third overall, but shy of record and almost close to $ GME last week. A bit ran out of steam in the second half of the day … “
UBS’s Art Cashin also noted that the same fervor for GameStop was absent with the silver: “Have we broken the back of the short squeeze? It’s still not entirely obvious. If it continues to sell on GameStop, it would indicate that was broken. the collaboration to squeeze the shorts was broken as they diverted their attention to splinter. where i think they may not be successful “.
Lack of leadership remains a critical issue, Egan said: “I think they have some people who you consider leaders, but who are not necessarily there to lead. They were accidental leaders. They lose their sense of FOMO, the fear of losing something. that has already happened. It’s a big bubble engine, it’s that people don’t want to regret participating in some kind of social event. So it’s also going down. “
Finally, the intense attention generated by the Reddit community makes Wall Street well aware of what they are doing, he added: “These message boards, for the most part, are public and their ability to attract a lot of people and focus that attention depends on whether they are public.But this also means that you can be a bank analyst and you can read these message boards anyway.Thus, the ability to surprise professionals has decreased dramatically now that this has happened once. “
What does all this mean? For Murphy, it means a likely return to the status quo ante: “The end is GME returns to a more realistic level.”
Note: Susquehanna Financial Group is a manufacturer of GME and SLV stock markets. SFG and / or its affiliates beneficially own 1% or more of the GME securities.
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