Russell Rebalance Climax - The Busiest Trading Day Of The Year | Zero Hedge: "In truth, however, markets and traders have been handicapping likely Russell adds, deletes and moves for over a month. How do we know? The Convergex Program Trading desk put together an analysis of how the various stocks that are transiting into/out of/in between Russell 1000 and 2000 indices. Here’s the math:
The 120+ names being added to the Russell 2000 are up an average of 11% since May 1st. This didn’t happen all at once, nor did it even happen in June when the preliminary names were announced. No – this group advanced 10% in May, and was up as much as 15% on June 15th. And the final move – today – could take this select list higher still.
In contrast, the handful (19, by our calc) of companies entering the Russell 1000 are up a mere 29 basis points since May 1st.
Even though most market participants are more familiar with the Russell 2000 as a de facto standard for small cap indices than the Russell 1000 for large caps, companies moving from the 2000 to the 1000 today are up 6.2% since May 1st. This may seem odd because common wisdom has it that far more capital is benchmarked to the 2000 than the 1000, resulting in a net sale position for equities making that transition.
Another seeming anomaly – the 50 companies moving from the 1000 to the 2000 are down 3.2% since May 1st. Again, the common perception is that moving “Down” to the 2000 means actually picking “up” more potential capital.
And how about those companies that are getting the heave-ho entirely? Yep – not good news there. The average return for the 150+ companies leaving the Russell 2000 is -1.9% from May 1st to today.
There is, of course, one remaining question: how close have the traders who are essentially renting these positions until the “Real” owners show up today gotten to accurately pricing the supply/demand imbalances created by the adds/deletes/moves? Will the Russell 2000 “Add” names trade higher today on the back of strong demand from index-oriented investors? Will the equities moving from the Russell 1000 to the 2000 see the benefit of strong demand going into the closing bell from their new, more widely followed index?
It is for this reason that Russell rebalance day is often the busiest single trading day of the year. Our head trader, Pete Coleman, told me that he expected this to be the case today. That’s how important the Russell rebalance can be. And it tells me one thing. Everyone is essentially a trader today, regardless of what your investment mandate is every other day of the year."
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