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Main Street Investor Sentiment Monthly Update

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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 October 2013 Investor Movement Index for the four weeks ending October 25, 2013 reveals:  

Score: 5.07 (compared to 4.97 in September)

Trend direction: Positive (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)

"Typically our clients dial back exposure when the market makes higher highs as it did in October, but they actually added more for the month," said Nicole Sherrod, Managing Director of TDAmeritrade's Trading Group. "Most of the focus was in momentum names like Netflix (NFLX) and Tesla (TSLA) rather than more broad based."

" Facebook (FB) was the most bought stock in October by a big margin among both active traders and long-term investors," Sherrod noted. "This is a very active stock for our clients since the IPO. In fact, FB represented 22% of TDAmeritrade's trades on the day it went public. I am curious to see how our clients react to the Twitter (TWTR) IPO because social media new issues tend to bring clients off the sidelines, particularly the younger, millennial set, as well as dormant accounts. Of that 22% TDAmeritrade client FB trading volume, 35% of it represented accounts that came out of dormancy to trade the stock on the first day of trading."

Additional popular names bought included: Rite AID (RAD), Yahoo! (YHOO), AT&T (T), Verizon Communications (VZ) and Kinder Morgan Energy Partners (KMP).

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