Retail traders have found a cheat code for the stock market, and barring some major action from regulatory authorities or a massive turn in their favored companies, they're going to keep using it to score "tendies" and turn Wall Street on its head.

What's happening: The share prices of companies like GameStop are rocketing higher, based largely on the social media organizing of a 3-million strong group of Redditors who are eagerly piling into companies that big hedge funds are short selling, or betting will fall in price.

• The mass buying from Reddit retail traders pushes the price higher, forcing the short sellers to buy the stock to cover their positions along with the market makers who sell options and need to cover their potential losses.
• Volume numbers suggest that institutional investors also are joining the fray and buying now.

One level deeper: Redditors are buying call options far out of the money, giving them the option to buy at prices well above the current value. The more the stock rises, the more market makers have to buy to keep their position neutral and insure against big losses.

• By purchasing call options at what seem like impossibly high prices, the Redditors suck market makers and shorts into buying increasingly more stock as the price rises.
• That feedback loop has pushed GameStop up 1,000% in just two weeks with no real end in sight.

Between the lines: Despite looking like a run-of-the-mill short squeeze, what's happening in GameStop is anything but that, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, tells Axios. Short sellers overall are not being squeezed out of the trade, despite having lost more than $6 billion since Jan. 1.

• "I’ve talked to several brokers, they’ve got a line of guys looking to short the stock if there’s any stock available to borrow," even though shorting GameStop now costs a fee of 150%.
• "The value shorts are getting squeezed out and being replaced by momentum shorts looking to ride the stock price down the back end of the roller coaster."

The big picture: The current state of financial markets "is a feature, not a bug" of the environment created by low rates and extraordinary market intervention, says Vincent Reinhart, a 20-year staffer at the Fed who now serves as chief economist at Mellon.

• The Fed "has created space and created a comfort level for market participants to be aggressive in their actions and they’re being aggressive in their actions."

Between the lines: Wednesday was proof that even on a major down day for the overall market, the Reddit crowd can still drive its favored stocks to the moon.

• While the S&P 500 sank 2.6%, GameStop rose 135%, AMC Entertainment jumped 301%, Blockbuster gained 120% and Express added 214%.

What they're saying: Leaders of the SEC, U.S. Treasury, Federal Reserve and other major financial organizations weighed in on the GameStop saga Wednesday, most simply to say that they were "monitoring" or "assessing the situation."

Sen. Elizabeth Warren took a notably harsher tone, without any real indication of what action she would like to see taken.