Index funds - see not post:
Non-index funds - most have not yet bought TSLA since entry. Place to discuss when they will purchase.
Non-index funds - most have not yet bought TSLA since entry. Place to discuss when they will purchase.
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Unclear, but over the past 3 yrs @mongo and I have discussed the following theory. For this S&P 500 rebalancing event, the following is at play:
Now this next part is conjecture: S&P 500 index funds will rebalance by selling approx 2.096/1.439 = 45% percent of the TSLA holdings over 3-5 trading sessions centered around the rebalance date (Fri, Dec 16, 2022). That's on the order of 100M shares of TSLA.
- the S&P 500 index reference date for the Q4 rebalancing was the 3rd Fri of Nov,
- at that time (Nov 18, 2022), TSLA S&P 500 weight was about 1.439%
- TSLA's previous weight for the Q3 rebalance (as of Aug 18, 22) was ~2.096%
Most Index Funds will trade (rebalance) at the Closing Cross on Fri, Dec 16, 2022. That makes today's volume (already 136M shares by 2:15 pm) the 'jockeying' before the main event.
Note that I do not KNOW this, and that @mongo has made a strong case that the daily change in index weights due to SP movements naturally rebalances the index. He may well be right, and there is no issue this week.
However, I persist because the available evidence has lead to successful predictions of strong volume on rebalancing days (typically, extreme volume at the Closing Cross on the rebalance date). So again, I don't know, I'm just following the evidence.
So what is the financial motivation for large hedge funds to beat down TSLA ahead of the S&P 500 rebalancing? They know that a large number of shares will change hands in the week of the rebalancing. If they can drive down the SP before the rebalance date, then they create their own bargain price on a large number of shares. All they have to do afterward is take their boot off the throat of TSLA, selling into the rising SP for a tidy and risk-free profit.
Anyway, I predicted this months ago now, so we'll see if events match the theory. But the puppeteers will not be exposed by this little drama, since they pull all the strings (and they own the theatre).
Surely that only applies if they all move in sync - if all the others go up in price, and TSLA goes down, then that does actually change the balanceWhy would a S&P 500 ETF need to sell TSLA in order to rebalance? The stock price movement automatically adjusts the stock's weight inside the index.
As an alternative to your hypothetical example, here's the personal opinion of someone with decades of experience on Wall St.
The S&P 500 is a prime example of a market capitalization weighted average that is continuously float-adjusted. (The Dow Jones Industrial Average is a price-weighted benchmark for U.S. stocks.) Float-adjusted means the index is continually recalculated based on the number and price of shares trading.
Mongo confused on your meaning, Rivian isn't in the S&P500...Glad ... you ... asked!
Here's the RIVN NASDAQ 50-day Chart. Note well the extreme volume today during S&P 500 rebalancing.
View attachment 885946
Lotza Mozza...
Cheers!
Mongo confused on your meaning, Rivian isn't in the S&P500...
Heck of a closing cross though...
So index funds will sell a bit due to the above. General rebalancing doesn't have much affect?Rebalancing issues this week? h/t @Papafox for the link. Note also that the largest S&P 500 index rebalance of the year is also on Fri, Dec 15 (typically at the Close)