The meme stock trading has cooled off significantly, and that is good news for the overall market. While the movement in names like AMC (AMC) , GameStop (GME) , and BlackBerry (BB) is entertaining and can be quite profitable for aggressive traders, It is not healthy for the overall market.
When the movement in a stock is more about the people that are trading it and has little to do with fundamental considerations, it undermines the idea that the stock market is a way to help value stocks. It is absurd to believe that the market efficiently prices stocks, but when the disconnect from reality becomes as great as it has recently with some of these names, then it turns the entire market into a farce.
What is particularly ironic about much of the meme trading is that it is the stocks that have the worst fundamentals that often perform the best. Stocks that have clear negatives are much easier to push higher if enough people can be persuaded to join in the game.
There is some bounce taking place in AMC Entertainment as I write, but the leader board is looking like a much healthier mix now. Stock pickers are focusing on names that are not being promoted by social media to the same extent, and that makes for much healthier trading.
The meme stocks make for some interesting trading, but they don't make for healthy market action.