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Will the S&P 500 Index Go the Way of Meme Stocks?

Here’s what usually happens when “financial lunacy” is prevalent

by Bob Stokes
Updated: July 28, 2022

You don't hear much about the meme stock craze anymore -- and for good reason.

It's all but dead and has been for months (Barron's, Jan. 28):

A Year After It Began, Meme-Stock Mania Is on Life Support

Early last year, the movement to buy meme stocks -- like AMC, Gamestop and others -- was largely driven by discussions on the internet, mainly by stock market novices.

When the movement was still going strong, our February 2021 Elliott Wave Financial Forecast made this comment about meme stocks:

A mania is pretty funny, especially at the very end, when financial lunacy is so prevalent that many assume it to be permanent.

Here's an update from our July Elliott Wave Financial Forecast:

The Meme Stock Meltdown

As you can see on the chart, the Meme Stock Index is down 65% from its early 2021 peak (as of the time the July Elliott Wave Financial Forecast published). So, indeed, the assumption of permanency was what you would call -- misplaced.

What you need to know is that an assumption of permanency is now geared toward the main stock indexes -- not just by amateur investors, but professionals (Bloomberg June 27):

S&P Analysts Haven't Been This Bullish In 20 Years

It's clear that these S&P analysts are shrugging off the downtrends that began in the Dow Industrials and S&P 500 index in January.

They may turn out to be correct -- in other words, the downtrend is over and another major leg up is set to start.

Then again, you may want to consult the stock market's Elliott wave structure.

The July Elliott Wave Financial Forecast describes two Elliott wave options for the S&P 500 index between now and the end of summer.

You are encouraged to read our analysis so you can prepare.

Clicking on the link below gets you started.

Downtrend in the U.S. Stock Market: Already Done?

Put a fork in it -- or so say professional market analysts.

Here's a Yahoo! Finance headline (June 22):

Analysts remain 'unusually bullish' about S&P 500 stocks despite downturn

Elliott Wave International has long observed that people tend to linearly extrapolate trends into the future. And considering the bull market lasted for nearly 13 years, it's no surprise that market observers would imagine the prior trend has resumed.

Yet, when a "third of a third" Elliott wave unfolds in a stock market downtrend, observers then realize that "we're not in Kansas anymore." (If you're new to Elliott wave analysis, a "third of a third" is the most powerful part of a trend)

You are encouraged to not wait for "then."

Prepare ahead of time by learning the message of the Elliott wave model for U.S. stocks.

Follow the link below to get started.

Financial Forecast Service

$97

All month long, Financial Forecast Service helps you stay ahead of the waves in the U.S. markets on the timeframes that matter the most. FFS covers the stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. It is our most popular service.

Comprises the monthly Elliott Wave Financial Forecast, 3x-per-week Short Term Update and at least 12x-per-year Elliott Wave Theorist.

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