Written by: Craig Erlam | OANDA
Thursday/s recovery is looking a little premature, with US futures off around 1% and tracking losses across Europe and Asia on the final day of the week.
Robinhood and others may have temporarily hit the reset button on the reddit revolt but the retail community is not deterred. With the company gradually reintroducing trading on the stocks, the retail revolution looks set to continue with GME up around 100% in pre-market trade.
With the retail community more fired up than ever and turning their anger and frustration towards those seeking to oppress them - or so the narrative goes - the next few weeks could be a wild ride. The community has already achieved one thing, they've dug up names I'd long forgot existed. I look forward, if nothing else, to all the nostalgia in the coming weeks as more forgotten firms turn into multi-billion dollar companies over night.
This remarkable trend does appear to be causing waves across the broader market as well, which is another development that should be fascinating to watch unfold. The logic of hedge funds having to unwind profitable long stock positions to cover short losses is seemingly dragging on these markets and perhaps and the worst possible time.
It was already becoming apparent that stock markets had lost their buzz. All that good news into year end being priced in combined with more severe and prolonged lockdowns around the globe left investors feeling a little lost. Suddenly the talk switched to whether we're seeing frothy markets, bubble-like behaviour and the pullback was underway.
Nothing major to worry about, of course, a temporary blip in an otherwise healthy market. But the problem could be exacerbated if the narrative gathers momentum or losses mount, forcing more action. I think the start of the year was always shaping up for a pullback but that doesn't mean a helping hand can't help facilitate that quicker.
The economic data isn't likely to provide the lift investors may be looking for. Being locked up at home is obviously not great for a functioning economy and while GDP data from Europe this morning suggests some countries may avoid a double dip recession, that's hardly something to celebrate. And lets face it, Germany's 0.1% growth can easily be revised away.
An onslaught of US data today will be of interest, although it may get overlooked by the frenzy around the open on Wall Street. In ordinary times, income, spending, housing and inflation could set the mood for the session. That may not be the case on this occasion but will be interesting none-the-less.
Earnings and the Fed were meant to be two other sources of potential inspiration this week but both have been massively overshadowed. Who'd have thought a few weeks ago that Apple earnings in a supercycle would be overshadowed by GameStop, AMC, Blackberry and Bed Bath and Beyond? You have to laugh.
Oil rally fades again
Oil's rally faded once again on Thursday and while crude is slightly higher today, it's now facing strong resistance above. This is a market that has been on an incredible run since early November and now finds itself at very health levels. It's lost significant momentum over the last few weeks and even a massive inventory draw this week has failed to change that. We could see a minor correction from here, or further consolidation as we've seen recently, but the market remains well supported by the actions of OPEC+, even in this challenging economic environment.
Reddit getting to grips with precious metals
Precious metals could be seeing some spillover from the Reddit community in the latest unexpected twist. Silver prices soared on Thursday and it's up around 3% again today. Gold isn't seeing quite the same moves but may be benefiting a little by association, with the yellow metal seeing gains of more than 1%, despite higher yields and a firmer dollar. It will certainly be an interesting one to watch and the situation unfold, with a move above $1,875 potentially triggering a run at $1,900. Volatility is only likely to pick up from here.
Musk sends bitcoin to the moon
It wouldn't truly be a wild week without bitcoin getting in on the action. Elon Musk has suddenly become the most influential person on Twitter, taking the mantle from Donald Trump after his profile was deleted. All Musk has to do is mention something and traders go wild for it. Like, for example, put bitcoin in his twitter profile, sending the cryptocurrency soaring, up 30% from its lows on Wednesday. Given everything we've seen this week, this is increasingly looking like normal behaviour. One thing is certain though, an apparent vote of confidence from the world's richest man doesn't half carry some weight and ends any chance of price breaking below $30,000, something that was looking increasingly likely. Even Binance suspending withdrawals did nothing to shake it. Whether Musk is an investor or just having a little fun doesn't even matter at this point. The markets are turning into his newest toy. Time to turn on Twitter alerts.
Related: Avoid Being Drawn Into Social Media-Fueled Stock Hysteria