With AAPL 19.8% Of The NASDAQ, Is Another Rebalancing Imminent?

Tyler Durden's picture

Just over 16 months ago, the NASDAQ did an unusual thing. As the WSJ noted at the time, AAPL, which had reached a 20% weighting in the NASDAQ-100, was rebalanced to 12.3%. This weighting was apparently too much for the index-provider who feared "the tech company's big weighting means that a change in fortune for the maker of iPhones, iPods and iPads has a huge impact on one of the most heavily traded indexes in the market." Since 04/05/11, when that rebalance occurred, AAPL's market cap has doubled, while the NASDAQ-100 is up just under 20% ($627bn versus $3.15tn). With the current weighting of AAPL in the NASDAQ-100 at 19.8%, we wonder what is next - as the WSJ noted at the time, any "rebalancing is likely to kick off waves of trading... as money managers scramble to adjust holdings to reflect the new composition of the index." Interestingly, AAPL has reached 20% of the index twice this year already - which just happened to coincide with significant selling pressure on the stock - will third time be the charm?

In April of last year - AAPL reached over 20% weighting in the NASDAQ-100 index - and here is the rebalancing that occurred - via WSJ:

 

AAPL has risen 97% since the last rebalance, while the NDX has risen only 19.6% and its other major peers have not kept pace at all...

 

This leaves AAPL at 19.8% weighting by market cap in the index - which has occured twice before this year - and each time (as we show above) the company's share price has rolled over.

 

We can only imagine the need to control AAPL's weighting is critical given the amount of automated selling that would be involved were it to trigger a rebalance - and the sheer size and plethora of long-only managers who hold the giant tech company.

 

It does seem that this provides a short-term opportunity at a minimum - to be short AAPL and long NDX - as the 20% weighting limit that was discussed in the WSJ article seems critical.

 

Charts: Bloomberg

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realtick's picture

One way or another this stock is going lower. The volume ain't happening during this latest move up:

http://chartistfriendfrompittsburgh.blogspot.com/2012/08/apple-on-balanc...

Precious's picture

 

No rebalance. Just rename NASDAAPL.

 

Muppet of the Universe's picture

Goldman to up aapl projections to 750 billion XD

FaaaaaaappleDaQery!  & who would say ZH doesn't give good recommendations?  Excellent analysis!

 

boogerbently's picture

Split it (1:10) and all the FB losers can afford to make back their $$$.

Rainman's picture

When AAPL fall off tree, at least they land on a mountain of fiat....BTFD !!

vast-dom's picture

long NDX????? r u nuts? if apple goes south so too deos NDX!

 

i knew someone who shorted apple over summer and is walking with a nice not so little limp....

JohnKozac's picture
HP posts mega-loss, $8.9 Billion (and that's only for this quarter!)

 

SAN FRANCISCO (Reuters) - Hewlett-Packard Co swung to an $8.9 billion quarterly loss as personal computer sales shrank again and it swallowed a huge write-down linked to its $13.9 billion purchase of Electronic Data Systems Corp.

 

http://finance.yahoo.com/news/hp-posts-mega-loss-eds-writedown-204341965...

 

 

Frastric's picture

Wahay! Gonna make some serious virtual money on Investopedia, shorted that stock!

reader2010's picture

Still smaller than the South Sea Bubble. Go AAPL? 

artman1933's picture

No not yet! AAPL has to reach $750-800 to reach 24%. 

 

https://indexes.nasdaqomx.com/docs/NDXSpecialRebalancePresentation.pdf

 

Facebook will probably be included in the NASDAQ100 sometime in September. This will probably result in a mini-rebalance of AAPL. 

The percentages are updated daily by 9:00 AM at the following site:

http://www.invescopowershares.com/products/holdings.aspx?ticker=qqq

 

marco1324's picture

Only takes one bad AAPL to spoil the barrel but I dont think its this one until ... 27th of September.

Neethgie's picture

aapl misses earnings, but the market things fuck it and continues climbing anyway

RobinHood73's picture

With the fed minutes today, QE is now 100% fully reflected in share prices, regardless of whether they act or not.  The fed has shot their remaining bullet. It sort of a moot point now whther they act or not. The market has 100% discounted this possibility.  And they may choose not to, given how unpalatable and political it would  appear.There is only downside macro risk. The macro/fed assymetry at this time may be the most attractive we have ever seen for shorting the market.  The fed may have to resort to purchasing stocks directly now to save the primary dealers/HFT who are loaded up to their eyeballs in stocks, waiting for a retail flow that will never show.

Barometer's picture

People coming off contract in the next 12 months are going to change to Samsung Galaxy, it's a matter of time because it is just so much better. I am looking forward to watching the check out desk at The Hedge Fund Hotel

buzzsaw99's picture

didn't you hear? crAAPL patented the rectangle.

machineh's picture

One thing likely to occur soon is that the equal-weighted Naz 100 will start outperforming the value-weighted Naz 100 ... just as the equal-weighted S&P 500 beat the value-weighted S&P 500 from 2000 to 2002 (and for the same reason -- overvalued tech stocks deflating).

roadsnbridges's picture

Does this mean QID will be dead?

YesWeKahn's picture

QQQ? I think it should be renamed to ASS (apple sole society)

Brother Sebastian's picture

The market manipulators won't let the AAPL fall too far from the tree.  Without it, there wouldn't be stock market.  And I'm sure you know what I mean.

roadsnbridges's picture

Stephanie Cutter Looks a lot like Kirsten Powers.  Is she from Alaska, too?

roadsnbridges's picture

Still unsure.  Will the NASCrapple become it's own index?

Sorely need a stupidity index...

SwingForce's picture

Why not exclude FOOD & ENERGY from the S&P 500? That would knock out #1 Apple & #2  Exxon/Mobil . Why not? Govt excludes such volitility from inflation readings, is this not EXACTLY the same thing???

roadsnbridges's picture

This sounds like Hope and Chains, baby!

poor fella's picture

Apple would really have something if only they would make a man's version of the iPhone. It's completely insane to only make a girl's version. If they do this, I'm calling it FIRST  - APPL  $1440/share  -  50% NASDAQ (especially as they sue anyone that makes a 'golden rectangular' shaped dohicky that makes calls).

roadsnbridges's picture

S lets Virgin sell the HTC EVO; much better.  But no mommy SIRI.

poor fella's picture

Is it JUST ME that physically wretches at the sound of that cot damn computer generated voice?!?!? I would have been through 4 of those things by now after a SIRI beatdown..

I have a pretty good imitation of her, whenever I REALLY want to piss myself off  ;)

(still digging an older HTC TPII with real keyboard), phones are getting a tad large IMHO - might have to go back to an Upstage! =D

NoClueSneaker's picture

... Newton will be, right on time there, when the APPL discovers the gravity ...

Meesohaawnee's picture

thanks much for jawboning crude to 98 ben. .yea that will get the iphone racin off the racks.

netplus's picture

The last time the nasdaq rebalanced Apple, Apple shares dipped in premarket trading, before recovering during regular U.S. trading hours.  It will just be another dip that can be bought.

AU5K's picture

Just replace the rest of the stocks in the NDX with more AAPL.

 

q99x2's picture

I looked at my brother's IPhone to see if I could use something like that. I couldn't easily use it for a map that was of use to me. I couldn't surf the web easily. I think I'm going to use the money for a dual boot Linux and Windows notebook and buy a camera as well. I'll keep my old Nokia phone. Mayswell bulldoze Apple along with the banks after the collapse.

I am a Man I am Forty's picture

Hey tyler, you can add another company in to equal apple's market cap, hpq lost 9 billion this quarter, lulz

catch edge ghost's picture

Ohh I get it. There's other stocks besides Apple.
Weird.

falak pema's picture

market? Oh maaaaaaaaaaaaaaaaarket! 

like aaaaaaaaaaaaaaaapple! 

ebworthen's picture

So...where's "the" stock index that includes everything?

I mean, why cherry pick apples (hah-hah) in U.S.A. to represent how the entire fruit and nut crop the world over is doing?

Oh wait...