They're Ba--aack! WallStreetBets Crew Sends GameStop Stock Soaring, Shorts Running for Cover

Wednesday turned out to be quite the fascinating day from a stock market and global finance perspective. While Fed chairman, Jerome Powell, was wrapping up his testimony to congress, promising more stimulative measures if needed to revive the economy, the Federal Reserve Systems' global payment network was on the fritz, as the system that allows wire money transfers crashed with intermittent disruptions for two to three hours, according to various reports.

The outage to FedACH and FedWire impacted banks, brokers, and mortgage lenders' ability to transfer funds in large and small amounts and also individuals and small corporations which employ the service to move payroll, deposits, and other sensitive financing.

Service was restored mid-afternoon, Powell went back to wherever he goes after speaking publicly and stocks were up across all indices in the US. All seemed to be going smoothly until shares of GameStop (GSE) began stretching out gains made earlier in the day around 2:00 pm ET.

After closing 44.97 on Tuesday, GameStop was already sporting a three to four-point gain when it began picking up momentum. BY 3:00 pm, it was at 53, hitting 67 a half hour later. Volume was spiking as was trading on related options, especially those with a nearby strike date of Friday, February 26. Trading in GME was halted twice in the final hour of trading, but the price continued upwards into the close.

By the 4:00 pm final bell rang, GameStop was in reddit wonderland, sporting a 91.70 handle, even as reddit.com was coincidentally knocked briefly offline. After hours, GME was up as high as 200 per share, backing off to around 150 overnight and into the pre-market.

Here's a note, posted early Thursday morning on the r/wallstreetbets forum at reddit.com explaining the situation to the incels.

If GameStop hits 800 before 2/26 we will trigger the Mother of All Short Squeezes, read up. from r/wallstreetbets

What is amazing about this second attack against the short-sellers of GME is not that the redditers have re-assessed their position, but that shorts have piled back into GameStop with many betting that the stock would retreat further. Could these hedge fund types have been so short-sighted to not realize the reddit crowd would be watching and waiting, especially after how they were shafted in the first attack?

The answer is yes. While the identities of the shorts, call sellers, and put buyers are as yet unknown, the level of activity in GME call options was extreme over the past two weeks. Wallstreetbets minions were watching, and it appears they have the hedgies trapped into losing positions again.

If the redditers are successful, it will mark an important pivot point for markets globally, signaling that the ordinary controllers of stock, bond, options, and futures markets are in the throes of a violent economic uprising, spurred by inequality and fomented over social media.

As the silver market - another touchstone of r/wallstreetbets - continues to evidence stress and a severe supply shortage, the entire financial system could be on the brink of collapse, thanks largely to some creative organizing and strategizing by any number of smart disrupters on reddit and elsewhere.

While the focus of the financial news punditry will be on GameStop for much of the next two days, the treasury and bond markets are where the real action lays. On Wednesday, the 10-year note spiked again, shooting past a 1.40% yield and closing out at 1.389%. Yield on the 30-year bond closed up three basis points to 2.24%, the highest yield in more than a year.

Also higher is crude oil, with WTI pricing above $63 a barrel. While a good number of Keynesian-style economists view higher oil prices as a sign of recovery, they fail to realize that it translates directly into higher prices for automotive fuel, which acts as a tax on everybody, hitting those at the lower economic levels the hardest. Unless the price of crude is corralled soon, gas at $3 and $4 a gallon could be just over the horizon, a level that would put a serious damper on the general economy while adding to inflationary pressures, which themselves are already showing signs of bubbling over into hyperinflation.

The next few days will be exciting, challenging, potentially life-changing, but the next six months will tell the global fortune for years ahead.

At the Close, Wednesday, February 24, 2021:
Dow: 31,961.86, +424.51 (+1.35%)
NASDAQ: 13,597.97, +132.77 (+0.99%)
S&P 500: 3,925.43, +44.06 (+1.14%)
NYSE: 15,539.42, +180.28 (+1.17%)