Apple Inc. (AAPL.US) unexpectedly falls on rebalancing day, who is to blame?

Last Friday, Apple Inc. (AAPL.US) was supposed to be the big winner in the major stock index quarterly adjustment, with index fund rebalancing expected to boost the stock price. In fact, for most of the day, this was the case, but a huge change occurred in the last 10 minutes before the closing bell. Apple Inc. quickly dropped more than 2% from its intraday high and closed in negative territory, surprising market observers who speculated on the reasons for the sudden reversal. Market trading orders, which instruct brokers to buy or sell stocks at the closing price of the trading day, showed an unusually large imbalance, indicating a net sell of 30 million shares of Apple Inc. This was more than half of the average full-day trading volume for the company over the past three months, and all of this volume was sold off in the final minutes of the week. The unexpected large sell-off pressure occurred despite the expectation that index-tracking funds would be major buyers of Apple Inc. stock on Friday after Warren Buffett sold a large amount of it in the second quarter, which would have significantly increased the company's weight in many indices. One theory suggests that some actively managed funds may have taken advantage of this predictable liquidity flow to sell off. Matt Maley, chief market strategist at Miller Tabak + Co., said, "Perhaps some investors wanted to take advantage of the opportunity to sell a large amount of stocks during the market rebalancing. They know that buying power will increase significantly, so this would be a strategic move to offload a large amount of stocks without causing a sharp drop in the stock price." Although Apple Inc. closed down 0.3% on Friday, its overall stock price rose 2.6% for the week. On Monday, the company's stock price initially fell 1%, then gradually recovered some lost ground, but still closed down 0.76%. As of the time of writing, Apple Inc. was down 0.19% in after-hours trading. Another possibility is that arbitrage players may have bought Apple Inc. stock before the rebalancing event occurred. According to Piper Sandler & Co., the rebalancing event for Apple Inc. is expected to create $350 billion in passive fund demand. Prior to last Friday, the stock had risen for three consecutive trading days, gaining nearly 6%. While the market becomes increasingly crowded, buying stocks that will have an increased weight in major indices and selling those with decreased weight has been a reliable strategy for many in the hedge fund industry. Mohit Bajaj, ETF head at WallachBeth Capital, said, "Arbitrageurs try to prepare ahead of various index events because they believe there will be volatility at the close on rebalancing day." "Although it's becoming more difficult, it still happens."