Impact on U.S. Stock Indices for Nasdaq Weighting
As for the underlying ETFs, a Nasdaq weighting would be a passive reduction in the market value of the underlying stocks. According to institutional estimates, there will probably be more than $20 billion in selling volume.
In the short term, the average daily turnover of these top-weighted stocks reaching tens of billions of dollars, the market acceptance doesn’t need to worry about it. Even if the index fell, at least "special rebalance" can not be used as a reason.
However, in the middle and long term, the rebalance of NDX will have an impact on the process of rising. More importantly, it is the overall rise of weighted stocks contributing to sharp soar of the Nasdap index; the other components did not contribute to too much increase. Therefore, after this adjustment, the declining weight of top enterprises will affect the speed of the rise in the index. Unless other stocks can rise collectively, the rate of increase of the index is difficult to match the speech on the first half of the year.
Source: TigerTrade
Trading strategies after the rebalance of NDX
The 20-day average is still a watershed for long and short observations. As long as the line is still in the strong support, it is not advisable to be overly pessimistic with the arrival of August. If falling below the 20-day average, it is the first try to short position, showing the more positions on bearish sides and corrections of the soar on the first half of the year. As to the reason of the first try to short, it is because the fluctuations will be coming with the top of index. With the common situation of few adjustments ahead of the formation of a new trend, it’s allowable to make layout in a little volume.
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