Sure is. $RSP equal weighted S&P500 etf had record inflows @ $1.1b US last week. Almost 50% of Russell 2000 stocks above 50 day moving average from the lows of under 20% in mid-March this year
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Index rebalancing leads to wild movements ...why ? When there are no changes required ?
Also how to read signals of which stocks are in demand ahead from index rebalancing movements ?
Is there any readable signals possible or they just random movements ??
Does anyone has any theories or explanations? ...enlighten us please ...
Not that hard.
If a stock is included into the index than the index fund managers are required to buy the shares for their fund. They have to buy, no matter how much they cost. Only fools would sell them in this situation on the cheap, wouldn't they? This is the reason the price goes up.
If a stock is excluded, than the index managers are required to take this stock out of their fund, and the fund has to sell, no matter what. Who would pay a forced seller top dollars?
Just think about it ...
And sure - there are some buffers. Sometimes the stock is just handed over from e.g. the small caps fund to the NZ50 fund (in the same house), but the numbers rarely match, i.e. somebody has to sell or has to buy.
Always a bit more expensive if you are a forced buyer ... or seller.
https://www.ft.com/content/b5281dfd-...d-88b3aa8f3272
The seven companies driving the US stock market rally
The optimists who think the bear market is ending and there is great times ahead with the next Bull Market cycle in sight will not like to see my chart below.
The scary thing about this chart is the Annualised PE Ratio value currently sitting at 30.64 and rising. It is easy to see inflation rate being the main driver of Annualised PE (PE10). High inflation or deflation = bad (lower than PE(10) average). Low inflation = good (higher than PE(10) average) Our recent low inflation Era is the reason why the market is "happy" (sentiment) with PE(10) operating at a much higher value than the average 15 -17 area.
However there are moments when the Market goes insane as seen on the charts with the extreme peaks and nadirs..At the moment Wall St market is living off the fumes of the low inflation era and it seems the present market (Wall St) is expecting the recent higher inflation rate to be short lived (in a secular sense)...If the higher inflation rate becomes sustainable and entrenched then expect the PE(10) to fall accordingly.
The PE(10) rule of thumb is anything above 20 is considered overvalued with the red line at >25 considered high risk of a major correction. The blue line< 10 is considered extremely undervalued. However these over and under valued figures depend on the inflation rate of the day of valuation..
For example the 30.4 value from an overall perspective is considered extremely overvalued and the market operating at high risk. Comparing that 30.4 figure two years ago when inflation was near zero % an analyst would have seen that 30.4 figure as being less over valued and a lesser risk than seeing that same figure today with inflation running at around 5%.
The charting of Annualised (inflation adjusted) PE Ratio shows the secular behaviour of the stockmarket (Wall St) which highlights ingrained (generational) investor trading behaviour sentiments which causes the market to be either undervalued or overvalued for very long periods of time.
The chart also highlights the wasted time in trying to determine what is a fair valuation of a market. The chart shows that history seldom sees the market at fair valuation (equilibrium). The Long term PE(10) chart shows the Wall St market is oscillating either between a secular Bull or Secular Bear Market Cycle.
Attachment 14643
Love the stuff you come up with Hoops
Nice to see you point out that history seldom sees the market at fair valuation (equilibrium