Hearing about multiple broker execution issues across the board doesn't fill me with confidence despite the Nasdaq up over 2% and the S&P rallying sharply this morning after the futures opened down nearly 1% last night, showing it's over 1% plus gain. Gamestop (GME) is coming back down to earth mildly but we all know the valuation is way off kilter. The fact this is over $50 let alone trading over $250 recently shows the stubbornness recent buyers have in the name. Like every squeeze and inflated story, it will eventually retrace but that could be weeks or even months from now. It could be tomorrow as well. Anyone who tells you any differently and with confidence is faking it.
Seeing the broker issues this leaves me wondering how often this could happen. What psychological impact will it have. Even if you didn't want to sell your position, what happens when someone tells you that you can't? When we had brokers last week telling folks they couldn't buy particular stocks, those stocks skyrocketed once they were made available again for purchase. I think some of the down moves we are seeing in those same names is from the inability to sell this morning...even if it wasn't on the top of a trader's mind.
There are two things I'll be watching for with Reddit/Wall Street Bets. First, the push on silver is underway. The hashtag: SilverSqueeze and SqueezeSilver were making the rounds this weekend. While I know the group is growing, silver isn't an easy thing to move. We're not talking about a small, failing retailer or retailers, as the case may be, some with thin floats. This is huge with a futures market around it and miners pulling product out of the ground and often using price surges to hedge their business.
The bigger issue is the divided front. Concentration of the WSB attacks weaken as their targets grow. Without an ever growing capital supply, the dollars to fund a push on silver will have to come from somewhere. The logical choice is Gamestop or AMC Entertainment Holdings (AMC) or a few of the other associated names. Granted, WSB membership has more than tripled, so maybe this isn't an issue yet, but it is something to consider. If the commands are to hold and not sell, then fresh capital is needed to expand the buying.
The second thing I'll watch for here is bad actors. The original analysis on GameStop was done a few months back, long before the recent spike. It was a well thought out thesis rooted in financial principals and capital structure. Unfortunately, the success of GME and now silver will draw pumpers and frontrunners into the WSB crowd. You can see it now when you visit the group. You can see it on Twitter. People are begging for a ticker to be mentioned or pushed. Most likely they are trapped in the stock or overinvested in the name. It is going to draw the manipulators looking for easy money though. If even partially successful, it's going to create bag holders and losses for many, while benefitting a scant few. Can they avoid becoming the next iteration of Yahoo Finance message boards? Doubtful, but I hope they prove me wrong.
