By Brandon Matthews

Recently, I wrote an article alerting readers of the upcoming Russell rebalancing of its indexes. Since that article was written, there have been major announcements from Sirius XM (SIRI) regarding not only its introduction of an Apple (AAPL) iPhone and iPod Touch application but with it news that the app itself is on track to reach historical download numbers at Apple’s iTunes store .

In an ironic twist, Sirius XM shares actually declined on the initial news of the Apple application release. Much ado was made of the fact that Howard Stern’s program is conspicuously absent from the application, leading some to speculate that the sell off was in some way related to this insignificant issue. Those subscribing to that theory however, are clueless. If Howard’s program had been included, these same financial news reporters, and I use the term loosely, would have been interviewing every religious group in the United States calling for bans on Apple products. No. We know that game. We’ve been around a while now.

The initial Russell reconstitution list was issued on June 12. Most of the “smart money” or mutual funds that track the index had already anticipated the fact that stocks such as Sirius XM are going to be removed this year. A more likely scenario is that these index funds would have already begun selling the equity short against the box, rather than join in an all encompassing, every man for himself “dump fest” on June 26th; the actual day of effect for the Russell rebalancing to occur.

The announcement of the app created an ideal situation for these fund mangers to sell their SIRI positions into the strength that had been created on the previous days run-up on the initial news. In fact, trading volume rose to 10 times its average daily share volume that day as the stock gave back all of its gains from the previous days session.

So what’s next? It looks to me as if the so called smart money may have pulled the trigger a bit too soon. What they failed to foresee was the popularity of the application. Popularity I might add, that is in spite of the perceived lack of Howard Stern. As Sirius XM’s Apple app is continuously downloaded around the globe, renewed interest in the equity is sure to build as we witnessed on last Friday’s episode of Fast Money on CNBC.

As for the Russell rebalance. It appears to me that the damage has already been done. The index funds are out and happy to have missed the next leg up. With those potential sales off the table, it clears the way for Sirius XM stock to rise past resistance, while potentially leading to new highs. Last weeks options volume spike of 2.50 calls may prove to be significant in the coming week.

Position: Long SIRI

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