To: Rob Preuss who wrote (969 ) 6/30/2000 3:13:10 PM From: Bob Huff Read Replies (4) | Respond to Briefing.com on some of the rebalancing going on. Digital Microwave's transition from Russell 2000 to 1000 mentioned.briefing.com Index Changes : Not only is Broadcom (BRCM +4 1/8) being added to the S&P 500 after the close today, but Qwest (Q +2 1/2) is benefitting from talk that its recently announced addition will also be executed soon as its acquisition of USWest (USW) closes. And finally, you have the Russell index rebalancing after the close. What it all adds up to is chaos. And chaos, by definition, is unpredictable. If you think that you know how to game these index changes, consider the example of the Nasdaq 100 changes on December 17 of last year. In the last hour of trading that day, all of the stocks being added to the index plummeted, while those being removed spiked higher. Or consider today's Digital Microwave (DMIC +2 3/4) example. It is expected to move to the Russell 1000 from the Russell 2000, which could mean a smaller weighting in a less important index, and thus net sales by index funds. Yesterday, it plunged in the last hour of trading, presumably as a result of this index change. Today, it has rebounded sharply. The trouble with these index changes is that everyone knows they are coming. You never know if the change is discounted, or even more than discounted, ahead of time as investors front-run fund managers. Every trading desk has its list of expected Russell index reconstitution (the final selections are not released until tomorrow, and then only to institutional subscribers) and is trying to game this process. Individual investors trying to do the same will be at a considerable disadvantage given their relative lack of tools. In short, there are a lot better ways to play the market than playing the chaotic index change game. - Greg Jones, Briefing.com
