“A little-known indexing event on Friday will likely result in the year’s biggest volume day, with large trading and potential price swings in well-known names like Apple, Microsoft, J.P. Morgan, and Grubhub,” Bob Pisani writes for CNBC.
“One of the world’s largest index providers, FTSE Russell, is rebalancing the large-cap Russell 1000 and the small-cap Russell 2000 indexes,” Pisani writes. “This is a significant annual market event because a lot of money tracks these indexes. Roughly $8 trillion is benchmarked to the Russell indexes, and $1 trillion is passively invested in funds that just attempt to track them. Nearly 10 percent of the money invested in the Russell 2000 is controlled by passive index funds, according to investment banking firm KBW, and when they make large-scale changes piles of money move around.”
“All that makes the reconstitution what traders call a ‘major liquidity event,’ meaning a lot of shares are going to change hands Friday. How many shares? The 2016 Russell reconstitution on June 24 of that year saw 6.7 billion shares change hands at the NYSE, three times normal volume and the largest volume day of the last three years. Last year’s reconstitution on June 23 saw nearly 5 billion shares change hands, the second largest volume day of 201,” Pisani writes. “Take Apple, which has been a buyback monster in the last few years. It will reduce its weighting in the Russell 2000 index, and there will be an estimated 2.7 million shares for sale at the close. Fortunately, that is only about 10 percent of the daily volume Apple trades, so the hope is that the price impact will be minimal.”
Read more in the full article here.
MacDailyNews Take: Seems like, so far, at least, the price impact on AAPL is minimal.
[Attribution: Apple 3.0. Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
Good! As one looks at the fundamentals, if today was another loss day, that would have been another bad sign. But, the Dow opened “UP” and is still in positive territory for now.
These guys may need to sacrifice another lamb, their predictions have not come to pass. Rebalancing of indexes is not a reliable predictor of trade volume.