Apple & Microsoft Confound Nasdaq 100 Rebalancing Expectations

When the Nasdaq 100 rebalancing was announced before the April 5 stock market opening, the expectation was that opportunities might arise as we approached the May 2 implementation, based on April 29 closing prices.

The best possibilities seemed to be an Apple (AAPL) sell-off (its allocation was being significantly decreased) and a Microsoft (MSFT) run-up (being significantly increased). The strategies were straightforward:

* Use price drop to build or expand an Apple position.

* Use price rise to reduce or liquidate a Microsoft position.

* Hedge: Buy Microsoft and sell Apple (then reverse the positions when the rebalancing effects occurred).

However, the opportunities didn’t arise. In fact, the reverse occurred…

This article is posted on SeekingAlpha.com.

Tags: Equities, Investment strategy, Nasdaq 100, Nasdaq 100 rebalancing, Rebalancing, Stocks

This entry was posted on Tuesday, May 3rd, 2011 at 6:35 am and is filed under Investment Insights. You can follow any responses to this entry through the RSS 2.0 feed.