Market participants look at many measures to gauge investor sentiment, even though they don’t always show an accurate picture. The CBOE Volatility Index (VIX), often referred to as the fear index, shows the market’s expectation of 30-day volatility, but it does not parse out institutional or hedge fund activity. Surveys like the Thomson Reuters/University of Michigan Consumer Sentiment, AAII online portals and broker polls are not always consistent with investing behavior. Mutual Fund Flows capture money flows in and out, but are outflows going to other investments?
Now there is a more accurate measure of true retail behavior from TD Ameritrade (AMTD). The Investor Movement Index (IMX) leverages data from from one of the largest pools of retail investors and traders in the world to create a behavior-based proprietary index which provides insight into Main Street Sentiment.
What is included?
Equities, Options, ETFs, Bonds, Mutual Funds, Cash.
What about leverage?
The riskier the portfolio exposure, the more intensely bullish OR bearish the portfolio is scored. Taken into consideration are, Margin, Options, Higher Beta Stocks, Leveraged ETFs.
How is it calculated?
Each portfolio is assigned a score. Each portfolio counts as one “vote”. The IMX is the median of all the portfolio scores.
The latest July 2013 Investor Movement Index for the five weeks ending July 26, 2013, reveals:
- Score: 4.87 (compared to 5.15 in June)
- Trend direction: Negative (trend direction shows whether the month-over-month change in score is positive or negative or whether there is no change.)
- Trend length: 3 months (number of consecutive months the trend direction has been positive or negative
The IMX declined to 4.87 in July 2013, its lowest level since January 2013, but the IMX remained at a moderately high level compared to previous months in its three-and-a-half year history. Like last month, clients were net sellers of fixed income mutual funds and fixed income ETFs, but the level of net selling activity decreased month over month.
“TDAmeritrade retail investors are selling into rallies on stocks that have performed well following earnings like Cisco (CSCO), Hewlett-Packard, (HPQ) Time Warner Cable (TWC) and looking for relatively attractive value in names that have underperformed or lagged the market like Coca-Cola (KO), Boeing (BA), AT&T (T) and Advanced Micro Devices (AMD),” said Steve Quirk who oversees the strategy and deployment of initiatives for the Active Trader segment at TD Ameritrade. “Clients continued to accumulate high-beta names like Tesla Motors (TSLA) and Zynga (ZNGA) as well as more mature tech blue chip stocks like Google (GOOG) and IBM (IBM).
Quirk added, “It is not just about in or outflows into stocks, ETFs and mutual funds. Of the six million actively traded retail accounts at TDAmeritrade, 40% of them include derivatives-based activity and that is key for our analysis because it shows how clients are sizing up protection and hedging their portfolios, particularly as investors are looking for a shift of compsure in the market.”
Written By: Jill Malandrino
For more information on the Investor Movement Index, including historical data and full monthly reports, please visit www.tdameritrade.com/IMX