But indexes aren’t static. Strong bullish sentiment for a particular company can cause that stock to become extremely overweight in an index. That’s exactly what happened regarding Apple’s (NSDQ: APPL) role in the Nasdaq index.

A modified market-capitalization weighted index, the Nasdaq index was originally constructed to give larger companies greater representation in the index–although no single security would account for more than 24 percent. Furthermore, all the securities that are weighted at 4.5 percent or less would not account for more than 48 percent of the index.

But the Nasdaq hasn’t been adjusted since the last major rebalance in 1998 and the weightings in the index no longer reflect actual market capitalizations. As a result, on May 2, 82 of the 100 securities in the Nasdaq index will see their weightings reduced. Most significantly, Apple will see its weighting plunge from its current 20.5 percent to 12.3 percent.

Index rebalancing generally isn’t a cause for concern. But these adjustments usually don’t result in drastic changes to index weightings. The nature of the Nasdaq itself makes a rebalancing of this magnitude a source of worry.

The Nasdaq is a popular benchmark for technology names. Consequently, more than $330 billion worth of assets track the index, and these funds are tied to almost 4,000 products such as mutual funds and ETFs traded around the world. When the rebalance occurs on May 2, shares will be traded furiously as fund managers bring their funds’ weightings in-line with the index. In fact, Nasdaq estimates that for every $1 billion tracking the index, 9.5 million shares will be traded as a result of the rebalance. That’s likely to create significant selling pressure on Apple shares, and spark buying of Microsoft (NSDQ: MSFT), whose share of the index will jump from 3.4 percent to 8.3 percent.

This shouldn’t cause your average investor to worry, and I must emphasize that the rebalance isn’t a reason to abandon any positions you hold in the index. Nonetheless, it’s an excellent example of the dark side of indexing. As passive investment strategies take hold and index products attract more assets, periodic rebalances will become more chaotic market events. But if you’re a day trader and a brave soul, you’ll have plenty of volatility to work with on May 2.

What’s New

State Street’s new SPDR Barclays Capital Issuer Scored Corporate Bond ETF (NYSE: CBND) takes advantage of a relatively new innovation in the fixed-income space–tracking a benchmark of corporate bonds that are weighted based on fundamental criteria. Bonds in the fund’s underlying index, Barclays Capital Issuer Scored Corporate Index, are weighted based on three ratios; return on assets, interest coverage and the current ratio. Additionally, for a corporate bond to be eligible for inclusion, it also must be rated as investment grade by at least two of the three major rating agencies. The fund’s holdings should consist of debt issued by companies with solid balance sheets.

The fund currently holds 240 bonds with a duration of about six years, which will make it fairly sensitive to changes in interest rates. Still, if you’re willing to swallow that risk, the fund offers an attractive 5.1 percent yield with monthly payouts and a low expense ratio of 0.16 percent.

ProShares Advisors continues to build its line of leveraged ETFs with the launch of ProShares UltraShort 3-7 Year Treasury (NYSE: TBZ) and ProShares Short 7-10 Year Treasury (NYSE: TBX). The ultrashort fund will offer 200 percent inverse exposure to the Barclays Capital US 3-7 Year Treasury Bond Index, while the short fund will offer straight inverse exposure to the Barclays Capital US 7-10 Year Treasury Bond Index.

It comes as no surprise that ETFs shorting Treasury bonds continue to be launched; interest rates are likely to rise by the end of year and investor sentiment is shifting against bonds. Nonetheless these funds aren’t suitable for a buy-and-hold strategy. Both offerings will see their leverage reset on a daily basis and shouldn’t be held beyond a single trading session.

The final new launch of the week was Van Eck Associates’ Market Vectors Germany Small-Cap (NYSE: GERJ). Van Eck’s newest offering will track small-cap companies that trade in Germany or generate at least 50 percent of their revenue in the country.

Although investing in small-caps generally entails greater volatility and economic sensitivity, they also provide more pure-play exposure to a target country. For example, iShares’ line of country-specific funds is dominated by large-cap names that generate a large percentage of their revenue internationally. Small-caps, on the other hand, tend to generate more of their revenues locally.

Once the fund builds up some volume, Market Vectors Germany Small-Cap should be an attractive way to play German economic growth.