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.
Who is included?
All accounts with $2,000+ in assets and have traded in the last month, representing almost six million accounts.
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 April 2013 Investor Movement Index for the five weeks ending April 26, 2013, reveals:
¿ Score: 5.31 (compared to 5.37 in March)
¿ 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: 1 month (number of consecutive months the trend direction has been positive or negative)
¿ Score relative to historic ranges: High (latest month's score as compared to the historical data range)
Nicole Sherrod, Managing Director of TDAmeritrade's Trader Group explains, "The IMX is still in the bullish range, having retraced only about 1%. In April, our clients realized gains as new highs were reached in the S&P. We also saw sector rotation as investors look for value opportunities such as the tech space. For example, there are more shareholders in Apple than any other time in TDAmeritrade's history. The value investors loaded up as the stock traded as low as $385 and traders got aggressive ahead of the company's anticipated dividend increase and share buyback announcement."
TDAmeritrade is also seeing more participation in options and futures trading each month. "In fact, 40% of TDAmeritrade's 6 million actively traded accounts are derivative based," said Sherrod. "We are pleased to see our retail clients actively trade derivative instruments because it allows them to proactively hedge their portfolios and make money, regardless if we are in a bull or bear market. When gold went parabolic in April, we saw a significant spike in futures trading and options on the gold-related ETFs and stocks. The playing field is being leveled for the retail investor, allowing them to trade like like the pros because of all of the resources, education and tools available across the company's suite of products."
"Another secular trend that continued through April is the hunt for yield, which means a lot of covered call writing. To service that demand, we announced the addition of a new product called "Strategy Roller". The feature allows retail traders to roll their existing option positions automatically, based upon user-defined settings chosen by the trader," Sherrod added.
For more information on the Investor Movement Index, including historical data and full monthly reports, please visit www.tdameritrade.com/IMX