Reddit Sentiment Swings Wildly on SPY Despite Core Inflation Below Fed Target

By David Beren Published Feb 17, 10:24PM EST

Quick Read

The S&P 500 ETF (SPY) dropped 1.31% over the past month. Its RSI at 43.91 approaches oversold.
NVIDIA, Apple and Microsoft represent nearly 20% of SPY as its top three holdings.
Over 75% of S&P 500 firms reported year-over-year earnings growth and PCE inflation is 1.82%.

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Reddit Sentiment Swings Wildly on SPY Despite Core Inflation Below Fed Target — © Travis Wolfe / Shutterstock.com

The SPDR S&P 500 ETF Trust (NYSEARCA:SPY | SPY Price Prediction) has traded essentially flat over the past month, slipping 1.13% as investors grapple with uncertainty regarding the Federal Reserve’s policy trajectory and concentration risk in mega-cap tech stocks. Retail investors have responded to the pullback with mixed sentiment on social media, with discussion shifting from bullish to bearish as traders debate whether current levels represent a buying opportunity or signal further downside.

The tension is palpable: SPY’s RSI sits at 43.91, approaching oversold territory but not yet at the extreme levels that historically signal capitulation. The ETF’s modest one-year gain of 11.95% reflects investor caution despite an increasingly accommodative Federal Reserve, which has cut rates by 75 basis points to 3.75% as inflation pressures have eased.

Retail Investors Caught Between Fear and Fundamentals

Reddit activity indicates a retail investor base caught off guard. The most engaged post over the past week came from r/wallstreetbets, where a user detailed an $87,300 loss on SPY puts, asking, “Should I quit my job?” The post generated sustained engagement with over 1,800 upvotes and hundreds of comments, dominating sentiment from February 12 through 17.

Bet everything but the house…should I quit my job? 87.3k Loss SPY Puts
by a user in wallstreetbets

Yet fundamentals tell a different story. Earlier in the week, discussions on r/stockmarket indicated that more than 75% of S&P 500 firms reported year-over-year earnings growth, and core PCE inflation is at just 1.82%, well below the Federal Reserve’s 2% target. These data points supported bullish sentiment scores in the 65-78 range early in the week before capitulation narratives took over.

An infographic titled 'THE INVESTMENT: SPY' by 24/7 Wall St. The top section displays a social sentiment score of 42.2 out of 100, labeled 'NEUTRAL (Past Week)' on a dial gauge, with the needle pointing to the orange segment. Below, a section titled 'What Is Driving That Score Today' lists contributing factors. Bearish 'Loss Narrative' points include an $87,300 loss on SPY puts and sustained engagement on a Reddit loss post, each accompanied by a red icon showing a downward-trending chart. Bullish 'Fundamental Strength' points include 75%+ S&P 500 firms with year-over-year earnings growth and core PCE inflation at 1.82%, each with a green icon depicting an upward-trending chart. The bottom section, 'Additional Context', shows RSI at 43.91 (Approaching Oversold) next to a gear icon and Fed Funds Rate at 3.75% next to a building icon. The infographic features a blue and white color scheme with red and green accents for sentiment indicators. — This infographic details the SPDR S&P 500 ETF Trust (SPY) social sentiment score, its influencing factors, and additional market context. Sentiment for SPY currently sits at a neutral 42.2 out of 100 based on the past week’s activity.

Historical RSI Patterns Document Market Cycles

Over the past year, SPY’s RSI has dropped below 40 on several occasions, with the index subsequently recovering within weeks in each instance. During last spring’s market turbulence, RSI reached deeply oversold levels before the index rebounded. Current levels suggest consolidation rather than panic, but with SPY’s top three holdings, NVIDIA (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT)—representing nearly 20% of the fund, concentration risk remains a concern for investors monitoring near-term performance.

About the Author David Beren →

David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.