Hi guys, long time reader, first time poster. I'm currently researching in order to add to my "catalysts into the close" - list (earnings after close, imbalances, index reconstitutions etc.) and try to understand, how ETF's rebalance their holdings. I'm not talking about index ETF's but especially Sector/Theme ETF's. I happened to read "ticker $XYZ went ballistic into the close due to ETF's rebalancing the portfolio" a lot but no news agency ever cites the source. Of course this is often used as an excuse for why a move happened, but I accidentially had some trades where I had a strong directional move together with a huge imbalance in the last couple of minutes before the closing bell for no apparent reason. Afterwards I read it was due to an ETF buying or selling. I went along reading dozen of actual ETF prospectuses in order to find out, how the particular ETF is structured, how the managers are adding/dropping stocks and especially when they are doing it, but besides some compliance stuff and a list of holdings that "is due to changes", I did not find much about their criteria how stocks are selected, bought and sold. It's completely different for index ETF's. Just go to their website, read their updates on what is added/deleted, that's it. My problem is the missing link between the tweets/news about an ETF rebalancing trade and the fact that I'm not able to replicate their thought process, because I can't find any official information. Like a small cap biotech goes through the roof, reg. imbalance is 30% of intraday volume followed by a dozens tweets about how Invesco Powershares is adding it do it's Biotech ETF. Then I look at the official website and find no info in advance, probably just an update a couple of days later. Where do i have to look? SEC files? Is there an independent official website where those guys have to report? Any qualified info is highly appreciated. Thank you
I rem Kid Dynamite on his blog talking about some of the thought process behind ETF rebalancing and late day moves. You might find this helpful: http://kiddynamitesworld.com/leveraged-etf-trading-flow-case-study-gold-miners-gdx-nugt-dust/