Glass Half Full of Apple (AAPL) Juice : ETF Observation

We took the liberty of scraping an interesting note from this a.m.’s  Notes from the WallachBeth ETF Desk :

“…On to Apple: Today will sure set a new tone and a new era for Apple lovers and haters; the iPad 3 (aka iPad) has been released, praised and torn down. The company is announcing a dividend and share buyback program. This is what we know.  I am a big fan of Apple products and culture, and while that typically keeps me from being bearish on the stock , here is what you may not know, or, may not be paying attention to:  the overwhelming success of AAPL could lead to a short term bearish event in the stock: a special rebalance.

AAPL is currently >18.5% of the weight in NDX. If that weight goes over 24%, a special NDX rebalance could be triggered. Additionally, if the sum weight of all members with a weight over 4.5% is greater than 48% [currently ~42.5%], a special rebalance could be triggered. So, while each event in itself has a certain probability, we could be only one member away from reaching the threshold.

If you had to set alerts on your monitor, I would set them for those three and watch their weights. ..”

Chris Hempstead, Head of ETF Trading, WallachBeth Capital