GDXJ vs GDX, page-13

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kittyboomboom

3,808 Posts.

576

18/03/21

20:27

Post #: 51878557
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Originally posted by bronkers: ↑

I have been researching this quite a bit and I'd love to get thoughts of the experienced guys here like:
@nordesmic
@Exised
@loki01
@BMWMPower

So far, this is what I have been thinking about. Looking forward to your thoughts.
1) GDX & GDXJ are both market-cap weighted ETFs that use MVIS and NYSE Arca indices respectively as their basis
2) NST being removed from GDXJ
3) NST already exists in GDX
4) I have read in books that a market-cap weighted ETF is 'momentum driven' i.e. the higher the share price, the more the ETF has to buy to keep the weight in line. However, if you read the example here with CBA and banks ETF, it is actually the opposite: https://www.vaneck.com.au/globalassets/home.au/special/education-new/vaneck_how-an-etf-works.pdf
How do we reconcile this?
5) My gut feel is that NST's removal from GDXJ has causes the market cap of NST to fall significantly. However, GDX will need to rebalance and buy more NST to bring back its own weighting to 3.10%. The holy grail is whether that will be sufficient to counter the market cap fall that has already occured. Nonetheless, it has to be bullish in the short-term at least (2-4 weeks). Am I thinking correctly?

Everyone, please refrain from discussion on options expiry/NCM or other gold stocks/POG/technical analysis of gaps/politics etc as I'd like to have a focused discussion on ETFs, its rebalancing/reconstituting and how they work in general. Thank you

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Dude you can't ignore options in that, they are one of the tools that could be getting used to assist the rebalance.

NST Price at posting: $9.36 Sentiment: Buy Disclosure: Held
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0 Great analysis

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