Investors are fascinated with meme stocks again as they hunt through lower-quality names searching for returns. And in the process they’re raising a “red flag” for the S&P 500 Index.
When some of the most heavily-shorted stocks in the market rally, like meme shares are doing now, and safe havens like consumer staples slump, investors should prepare for a few days of weakness in the broader market, according to Jonathan Krinsky at BTIG.
The Solactive Roundhill Meme Stock Index, home to the likes of Rivian Automotive Inc. and Riot Platforms Inc., has climbed more than 10% in the past three sessions, while the Consumer Staples Select Sector SPDR Fund is down 1.3%. Over the past 18 months, the spread between the two has been 10 percentage points or more 17 times, and the S&P 500 has been lower three and five days later in 12 of those occasions, Krinsky wrote.
Read the full story on Bloomberg here.