Here's why meme stocks are surging

Retail traders are using a signature playbook to push meme stocks and other assets higher.

I guess meme stocks are the perfect tell for this. A bit of a story about the BTC-USD testing $25,000 is one of the things that comes back. Sosnick said that a lot of people are using the 2020, 2021 playbook over again.

For that period, it was a spectacular playbook. The rules of the game seem to be changing. Despite Fed concerns and uncertainty out of China, and questioning whether the markets are in a bear market rally, stocks like GameStop GME AMC AMC and Bed Bath and Beyond BBBY have recently gone up. New names like AMTD Digital HKD have also surged.

Retail traders poured into names like GameStop and AMC in early 2021. They became meme stocks amid a period of high liquidity in the markets and looser monetary policy. Since then, the Federal ReserveFederal Reserve has hiked rates due to soaring inflation.

The markets went into bear market territory earlier this year, but have since come off their mid-June lows.

Sosnick said the playbook is working for now. But I have to wonder if using the same investment playbook that worked for you, which includes Don t fight the Fed -- which in that period the Fed was your friend - now the Fed is a headwind. Sosnick notes that the meme stock rally is less organic. You had people coming in who never invested before investing into these stocks in the first meme stock craze. Now it seems to be the same cast of characters chasing the same list of names with a couple of new exceptions every so often, said Sosnick.

He added that it becomes more of a self contained loop. If you are early, meme stock trading works great. It works terrible if you are late.