The Fourth of July in December

Get ready for fireworks when the Nasdaq 100 and S&P 500 go through rebalancings and reweightings.
Publish date:

Get ready for some serious fireworks tomorrow. That's because the

Nasdaq 100

and the

S&P 500

go through giant rebalancings and reweightings. Funds will have to shift out of some stocks and into others as directed by the index masters.

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Last year, some of these rebalances produced some dramatic anomalies. Some companies went up huge because they were illiquid and the market-makers weren't ready for the rebalancing. Others went up by mistake as people bought the wrong stocks. There was chaos, just chaos, particularly with last year's


reweighting. (Fortunately, that is


being reweighted tomorrow.) A ton of money gets indexed, so a ton of money will jump through these hoops. It is very hard to game. (The best gaming literature I have seen on the subject comes from

Lehman Brothers

. I have no right to reproduce that research, but I urge you to call Lehman if you are interested in

Equity Derivatives Research


Some of the larger stocks that could be affected positively include

Home Depot

(HD) - Get Report


Johnson & Johnson

(JNJ) - Get Report



(AVP) - Get Report



(PNC) - Get Report

, however, could be under pressure.

But it is in the smaller-cap arena that the true dislocations can be observed. That's where I want to pounce. Of course, we won't know the outcome until the bell tomorrow, but unlike most expiration days, I will be in on the hunt at the close for bargains.

Hope to see you there.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at