Nasdaq re-weighting could hurt Apple’s shares

  • Posted: 08 April 2011 12:37 AM #76

    Interesting link from the intraday thread. 

    Post from Prazan:

    An interesting take of the effects of the Nasdaq rebalancing, particularly in the examination of Microsoft?s share price after it was rebalanced in the 90?s.

    http://seekingalpha.com/article/262276-nasdaq-rebalancing-should-have-minimal-effect-on-apple

         
  • Posted: 08 April 2011 12:48 AM #77

    alice - 08 April 2011 03:37 AM

    Interesting link from the intraday thread. 

    Post from Prazan:

    An interesting take of the effects of the Nasdaq rebalancing, particularly in the examination of Microsoft?s share price after it was rebalanced in the 90?s.

    http://seekingalpha.com/article/262276-nasdaq-rebalancing-should-have-minimal-effect-on-apple

    I attempted to compare share volume YOY and failed to see any reliable pattern/clue of rebalancing for period April 1 - 7.  The April 1 sell-off was probably the best clue that Nasdaq was trimming weight of AAPL.  The retail investors are schmucks who have no choice but to ride the coattails of hedgies, MM and the rest.

         
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    Posted: 09 April 2011 11:10 PM #78

    Spoke with John Jacobs, executive VP of the effort to rebalance the NASDAQ 100.  He stated the QQQ ($24.6 Billion) and the EQQ ($1 Billion) will be required to rebalance within a 7 day window that bridges May 2 and that these two funds would most likely do all at one time on one of those days. 

    The next step is to find out the other funds that attempt to mirror the index.  I have sent an email to the author of the WSJ article asking for the list of funds that make up the balance of the $330 Billion he cited in his article.  With that info I plan to start looking at prospectus info to determine what their mandate requires for the rebalancing to determine whether some of these shares have already been traded ahead of time. 

    Anyone have an alternative source for which funds, etc. attempt to mirror the NASDAQ 100?

         
  • Posted: 10 April 2011 12:13 AM #79

    madmaxroi - 10 April 2011 02:10 AM

    Spoke with John Jacobs, executive VP of the effort to rebalance the NASDAQ 100.  He stated the QQQ ($24.6 Billion) and the EQQ ($1 Billion) will be required to rebalance within a 7 day window that bridges May 2 and that these two funds would most likely do all at one time on one of those days. 

    The next step is to find out the other funds that attempt to mirror the index.  I have sent an email to the author of the WSJ article asking for the list of funds that make up the balance of the $330 Billion he cited in his article.  With that info I plan to start looking at prospectus info to determine what their mandate requires for the rebalancing to determine whether some of these shares have already been traded ahead of time. 

    Anyone have an alternative source for which funds, etc. attempt to mirror the NASDAQ 100?

    I’d bet all my winnings from last night poker game that Apple knows.  Perhaps Joan Hoover at IR would share the information; perhaps not.  Morningstar probably knows; someone who is a client (I am not) might be able to query them.

         
  • Posted: 10 April 2011 12:35 AM #80

    alice - 08 April 2011 03:37 AM

    Interesting link from the intraday thread. 

    Post from Prazan:

    An interesting take of the effects of the Nasdaq rebalancing, particularly in the examination of Microsoft?s share price after it was rebalanced in the 90?s.

    http://seekingalpha.com/article/262276-nasdaq-rebalancing-should-have-minimal-effect-on-apple

    I applaud Jason Schwarz for doing the work.  But I must point out that during the three month period (11/08-01/09) of his analysis the S&P500; rose from 1,094 to 1,273.  And we will all recall that this was the height of the tech stock bubble.  Not exactly a clone of today’s market conditions.

         
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    Posted: 10 April 2011 01:48 AM #81

    alice - 08 April 2011 03:37 AM

    Post from Prazan: An interesting take of the effects of the Nasdaq rebalancing, particularly in the examination of Microsoft?s share price after it was rebalanced in the 90?s.

    I think this bit was a bit more interesting:

    The primary reason why hedge funds manipulate Apple is because it gives them leverage over the index. Without a 20% weighting, Apple is less appealing for this purpose.

         
  • Posted: 10 April 2011 02:51 AM #82

    madmaxroi - 10 April 2011 02:10 AM

    Spoke with John Jacobs, executive VP of the effort to rebalance the NASDAQ 100.  He stated the QQQ ($24.6 Billion) and the EQQ ($1 Billion) will be required to rebalance within a 7 day window that bridges May 2 and that these two funds would most likely do all at one time on one of those days. 

    The next step is to find out the other funds that attempt to mirror the index.  I have sent an email to the author of the WSJ article asking for the list of funds that make up the balance of the $330 Billion he cited in his article.  With that info I plan to start looking at prospectus info to determine what their mandate requires for the rebalancing to determine whether some of these shares have already been traded ahead of time. 

    Anyone have an alternative source for which funds, etc. attempt to mirror the NASDAQ 100?

    Thanks for the info.  Please post when you have more data.  I appreciate it.

         
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    Posted: 10 April 2011 02:24 PM #83

    Not sure if this was posted before.

    http://online.wsj.com/article/SB10001424052748704587004576245240818449346.html?ru=yahoo&mod=yahoo_hs

    But they say 7 million aapl shares.

    People need to keep in mind that selling does not always mean the stock will decline.  The shares sold will be bought and resold and rebought the same day.  The only question is will there be enough buyers to keep the stock from dropping too much.

    If earnings are great and the stock goes nowhere I suspect there will be plenty of buyers waiting to pick up the shares being forced to sell by the rebalancing.

    Overall affect will be that we will see a short term correction and nice run up by middle of May.

    Just in time for Vegas.smile

         
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    Posted: 10 April 2011 03:53 PM #84

    omacvi - 10 April 2011 05:24 PM

    Not sure if this was posted before.

    http://online.wsj.com/article/SB10001424052748704587004576245240818449346.html?ru=yahoo&mod=yahoo_hs

    But they say 7 million aapl shares.

    People need to keep in mind that selling does not always mean the stock will decline.  The shares sold will be bought and resold and rebought the same day.  The only question is will there be enough buyers to keep the stock from dropping too much.

    If earnings are great and the stock goes nowhere I suspect there will be plenty of buyers waiting to pick up the shares being forced to sell by the rebalancing.

    Overall affect will be that we will see a short term correction and nice run up by middle of May.

    Just in time for Vegas.smile

    Much better article than the author’s first on this subject as it adds more clarity to how much of the $330 Billion that tracks the index is actually invested in the underlying shares of the companies in the index.  So of the $330 Billion, anywhere from $30 Billion to $50 Billion is the money in play.  The balance of the $330 Billion is in index options, futures and other like derivatives.  As for the $30 to $50 Billion, $25 Billion (QQQ & EQQ) will be required to be traded sometime during the 7-day window that bridges the May 2 rebalancing date and will most likely be done at once.
    So, in summary using my previous $340 share price to maintain comparability, 5.8 million AAPL shares will trade during the 7-day window and another 1.2 million shares if the $30 billion figure is correct or another 5.9 million shares if the $50 billion figure is correct will trade based on the mandates contained within the prospectus for those mutual funds.

    Still not ideal, but much better than the 77 million share trade that was originally thought to be coming.

    IMHO, I view this as mild noise that will be used by MM to make some hay with the resultant FUD that comes with all of the misinformation.

    Nice article and link Sir Sponge!!!

    [ Edited: 10 April 2011 03:56 PM by madmaxroi ]      
  • Posted: 10 April 2011 05:13 PM #85

    madmaxroi - 10 April 2011 06:53 PM

    IMHO, I view this as mild noise that will be used by MM to make some hay with the resultant FUD that comes with all of the misinformation.

    Nice article and link Sir Sponge!!!

    Great stuff! 

    So my take is that there’s a confluence of buyer’s staying out of Apple and seller’s getting out in anticipation of getting a better entry point when the 5M+ shares get flushed.  This could create a coiled spring during the 6 days of May.  It’s possible there are well more than 5M shares that got sold waiting for a better price already.  No one knows.  Of course, these AAPL buyers, temporarily on the sidelines. are taking a calculated risk that FQ2 2011 EPS pushes Apple above $350 for good and any subsequent sale of 5M+ shares from rebalancing get snapped up without the discount they were expecting. 

    As I’ve said before, no one gets the low and no one gets the high and if one’s time horizon stretches out 6 months and longer, the pricing at Friday close looks very appealing to me.  Do your own due diligence, as always.

    [ Edited: 10 April 2011 06:13 PM by ByeTMO ]      
  • Posted: 11 April 2011 09:54 PM #86

    An update:  Today, I spoke to a person in a position to know re: Nasdaq’s intention to reduce weighting of AAPL.  He clearly does not believe Apple’s recent performance can be attributed to Nasdaq’s move.  If the # of shares is limited to 6-7M that will change hands during April 27 - May 4, it’s hard to argue that this would be enough shares to depress AAPL down to $330.

    He also argues that MSFT is down over the past 5 days, yet its weighting is expected to almost double after the rebalancing.  One would expect MSFT to rise if AAPL operated under the theory I postulated earlier.

    AAPL is down for probably similar reason(s) it was down mid-March.  Meaning:  Your guess is as good as mine.  What is disappointing is the market more than cooperated over the past 10 days and yet AAPL floundered, right up to now, less than 10 days that Apple reports FQ2 2011 earnings. 

    Is it a sling shot between now and April 20th or something else?  I don’t know.  But I’m ruling out Apple rebalancing as the catalyst to explain recent share price decline.  Thinking longer term is probably the best way to absorb the last two weeks.

         
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    Posted: 11 April 2011 10:20 PM #87

    If we dont get at least a $20 pop before earnings (from $331), I would be flabberghasted.

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    Full Disclosure:

    - Long Apple
    - Pro: Apple HDTV, iPhone Air, Stock split, Consumer robotics

         
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    Posted: 11 April 2011 10:37 PM #88

    Mercel - 12 April 2011 12:54 AM

    An update:  Today, I spoke to a person in a position to know re: Nasdaq’s intention to reduce weighting of AAPL.  He clearly does not believe Apple’s recent performance can be attributed to Nasdaq’s move.  If the # of shares is limited to 6-7M that will change hands during April 27 - May 4, it’s hard to argue that this would be enough shares to depress AAPL down to $330.

    He also argues that MSFT is down over the past 5 days, yet its weighting is expected to almost double after the rebalancing.  One would expect MSFT to rise if AAPL operated under the theory I postulated earlier.

    AAPL is down for probably similar reason(s) it was down mid-March.  Meaning:  Your guess is as good as mine.  What is disappointing is the market more than cooperated over the past 10 days and yet AAPL floundered, right up to now, less than 10 days that Apple reports FQ2 2011 earnings. 

    Is it a sling shot between now and April 20th or something else?  I don’t know.  But I’m ruling out Apple rebalancing as the catalyst to explain recent share price decline.  Thinking longer term is probably the best way to absorb the last two weeks.

    But, that doesn’t preclude others from thinking that it does matter more than it does. No? Also, MSFT is up about 1.7% since the 5th while AAPL is down 3%.

         
  • Posted: 11 April 2011 10:55 PM #89

    ChasMac77 - 12 April 2011 01:37 AM
    Mercel - 12 April 2011 12:54 AM

    An update:  Today, I spoke to a person in a position to know re: Nasdaq’s intention to reduce weighting of AAPL.  He clearly does not believe Apple’s recent performance can be attributed to Nasdaq’s move.  If the # of shares is limited to 6-7M that will change hands during April 27 - May 4, it’s hard to argue that this would be enough shares to depress AAPL down to $330.

    He also argues that MSFT is down over the past 5 days, yet its weighting is expected to almost double after the rebalancing.  One would expect MSFT to rise if AAPL operated under the theory I postulated earlier.

    AAPL is down for probably similar reason(s) it was down mid-March.  Meaning:  Your guess is as good as mine.  What is disappointing is the market more than cooperated over the past 10 days and yet AAPL floundered, right up to now, less than 10 days that Apple reports FQ2 2011 earnings. 

    Is it a sling shot between now and April 20th or something else?  I don’t know.  But I’m ruling out Apple rebalancing as the catalyst to explain recent share price decline.  Thinking longer term is probably the best way to absorb the last two weeks.

    But, that doesn’t preclude others from thinking that it does matter more than it does. No? Also, MSFT is up about 1.7% since the 5th while AAPL is down 3%.

    I think 1.7% is hardly convincing evidence when the weight of MSFT doubles on Nasdaq rebalancing.  But you’re right, perception may be driving this bus.  And the guy with whom I spoke does have a dog in the fight—he clearly sounded defensive arguing his position, not wanting the Nasdaq to take any blame here.  He’s probably a bit weary taking all the phone calls from embattled holders of AAPL.

         
  • Posted: 15 April 2011 12:17 AM #90

    mcharliem - 07 April 2011 11:40 PM

    While there will be massive volume for AAPL on the closing cross on May 2nd, there won’t be any sort of a significant spike down.  Traders trade the closing cross all the time, and while there may be some arbitrage opportunities for algorithmic traders, any sort of a spike down will already be completely priced in by the time the closing cross occurs.  Otherwise, a trader could simply short millions of shares leading up to the close on May 2nd and cover multiple points lower when everyone sells at the cross, and there’s no way it will be that easy.  It is a known event, and it will be priced in before it happens.

    The majority of the downside pressure from the rebalance happened immediately after it was announced and the remainder will be slowly priced in between now and May 2nd.  The worst of the event has already happened, and AAPL has held up quite well.

    Using this quote as a topic bump; and also as I find it an interesting consideration.

    Lots of questions in this thread; far fewer answers (though there are some). Still seems to me that this is a (somewhat) significant issue until we get past it.