Memorial Day Meme Stock Madness?

Earlier today, Aaron Saldanha and Sinéad Carew of Reuters reported that surging AMC shares poised to end week up more than 150%:

Shares of AMC Entertainment (AMC) hit record highs before paring gains on Friday, putting the movie theater chain on track for a 156% weekly gain.

AMC's shares were last up 16.4% at $30.87 after earlier hitting a high of $36.72,and on track for their biggest weekly gains since late January.

Shares in GameStop were down 2.4%on Friday. Shares of the videogame retailer, which has been at the heart of the so-called "stonks" retail trading mania this year, were still set for its best weekly gain since mid-March, up about 40% so far.

Retail traders' shift into so-called meme stocks - shares favored by the denizens of online communities - comes on the back of a selloff in Bitcoin and other cryptocurrencies whose prices have slumped in recent weeks.

AMC saw some $127 mln in inflows from retail investors on Thursday, according to Vanda Research. AMC rose 35.5% in that session adding more than $3.3 billion to its market value, according to data from Refinitiv.

Data shows the cinema operator AMC has been the most traded stock on brokerage Robinhood's popular trading app, as well as on that of UK-based Freetrade, where buy orders have outnumbered sell orders two-to-one.

Investors shorting meme stocks GameStop, AMC and private spaceship company Virgin Galactic (SPCE) are estimated to have lost $2.8 billion so far this week, data from financial analytics firm Ortex shows. They lost $1 billion on Thursday alone.

On trading-focused social media site Stocktwits (ST), message volume related to AMC spiked by nearly 40%, with more than 97% of messages reflecting positive sentiment towards the stock.

"AMC - why sell now when u can sell later for much more, ya (k)now?," user lilant135 wrote, while fellow retail trader BossNoHugo chimed in, "imagine selling because a stranger on ST told u to do so."

We are a little past midday Friday and it's been another crazy week with meme stock mania.

It seems like the Reddit/WallStreetBets YOLOers of the world are uniting once again to drive up the shares of hot meme stocks they track, with AMC Entertainment shares being at the top of their list.  

A 5-day chart of AMC Entertainment's shares  (AMC) shows how meme stock mania is alive and well, reaching a 52-week high of $36.72 earlier today before the big dump came:

The unbelievably explosive behavior of AMC shares this week is yet another sign that the sharks on Wall Street aren't done pumping and dumping meme stocks as the Fed stays put indefinitely and there's still plenty of liquidity to drive this insanity further.

Astonishingly, the media and even Zero Hedge still think it's retail investors driving this frenzy but they are marginal players in this very dangerous pump and dump game.

In fact, Vanguard and BlackRock together own 15% of AMC's shares as of the end of last quarter, which makes you wonder if they're behind the pump and dump or is it some sophisticated quant hedge funds which are ultimately the funds behind Reddit/WSB?

I don't know, all I know is I've easily counted over 100 pump and dump scenarios this year alone, and it's not just meme stocks (full list is available here). 

The level of insanity we are witnessing in markets these days reminds me of 1999-2000 except now it's targeted to a handful of meme stocks and other concept stocks and it comes and goes very quickly and unexpectedly in a rolling insanity pattern.

The Securities and Exchange Committee (SEC) is aware but they are sitting on their hands, petrified that increased regulatory scrutiny will deflate the meme bubble, hurt powerful hedge funds and hurt big Wall Street banks that rely on trading commissions with these hedge funds.

On top of meme stock folly, you also have to wonder, how many funds out there are leveraged like Archegos, engaging in very risky trades using total return swaps?

The SEC and other regulators (CFTC) should provide transparent data on all this but good luck finding it.

In the meantime, algos are having fun pumping and dumping stocks at will as unsuspecting retail investors try their hand in the Casino Royale. 

Of course, most people trying to play these meme stocks are getting their head handed to them, some are making a killing but the vast majority are completely and utterly clueless. 

What worries me is we are witnessing the final stages of a very sick market which is heavily reliant on the Fed, I call it the "convulsive state" where you get a series of pops and drops but the overall market goes nowhere and when the selling picks up, it will be ferocious.

The fact that AMC is the poster child this week for all this insanity is prophetic in the sense that I feel like we are watching a really bad movie, one we have seen plenty of times before,

All bubbles are different, this one is different because the Fed and other central banks and governments all over the world are backstopping it, but the end result will be the same.

Having said this, there's no doubt 2020 and 2021 will go down in history in the sense that there are so many bubbles all driven by an insane amount of liquidity.

Electric vehicle, fuel cell, solar, biotech, meme stocks, cryptocurrencies, housing, there are concurrent manias going on all at once.

People are treating risk as if it's a four-letter word, and the end result will be catastrophic.

Anyway, enjoy your Memorial Day weekend down south, stay safe everyone.

Below, CNBC's "Halftime Report" team discusses where they're expecting markets to head next.

Also, CNBC's Kate Rooney reports on how much money short sellers have lost on meme stocks Virgin Galactic, AMC and GameStop.

Lastly, Lacy Hunt talks about about disinflation, the velocity of money and what happens when the supply chain gets restored. If you want to restore some sanity to these insane markets, take the time to watch this clip, he explains where we are headed.