Meme stocks are back.

And so are the signs of euphoria.

This is exactly the kind of parabolic move I’ve been wary of.

Although I remain bullish over the long term, the risk of a near-term pullback is increasing.

Markets don’t move in a straight line, and after a strong run, even a healthy 4–5% correction wouldn’t be surprising. It would be welcome. It would create wonderful opportunities.

The challenge is that high-growth and momentum stocks tend to be hit disproportionately hard during these periods. If the market falls just 5%, these stocks could easily fall 20% or more.

Hence, as mentioned in the weekly market update, if you’re holding a lot of speculative momentum stocks, be ready for some volatility or reduce some exposure.

The last few weeks have been incredible, so the main goal now is not to give too much back.

A good example of excessive action is Opendoor ($OPEN)

It’s up nearly 10x since the start of July.

On Monday, it was up 120% at one point before giving it all back.

Adding to that many speculative and momentum names are starting to reverse sharply.

This is exactly the kind of parabolic move to watch out for.

Iris Energy ($IREN) is another good example.

It was already extended (see the orange dots), then tried to break out but failed on heavy volume. At one point it was up 17%, but it ended the day nearly flat.

Kohl’s ($KSS) is another one.

A dying company caught in a short-squeeze and was up 100% at one point before giving most of it back..

And there are plenty more examples.

GoPro ($GPRO), Cardlytics ($CDLX), Beyond Meat ($BYND), Krispy Kreme ($DNUT), American Eagle Outfitters ($AEO) etc.

The hunt for small cap stocks with large short float is on.

These kinds of moves often show up toward the end of a rally. That doesn’t mean the bull market is over — not at all. But it means that a pullback is becoming more likely.

There are no guarantees in the market. The pullback might not come or it might be shallow. Maybe earnings season will show there’s no real reason to worry, and the bull market just keeps going.

But all I know is that the risk-reward ratio is not favorable right now. Hence, some caution near-term is warranted. And to be clear being cautious doesn’t mean bearish.

We’re still in a bull market powered by AI. And there will be a mountain of opportunities ahead. So, the main job right now is to balance long-term optimism with short-term caution.

In summary:

• Meme stock euphoria is returning

• Seasonality is starting to weaking

• Trade deadlines are approaching

• Uncertainty around FED policies

• Non-stop rally since the lows

• Earnings season coming up