Market participants look at many measures to gauge investor sentiment, even though they don't always show an accurate picture. The
CBOE Volatility Index
, 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 August 2013 Investor Movement Index for the four weeks ending August 30, 2013 reveals:
¿ Score: 5.16 (compared to 4.87 in July)
¿ 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)
"This is one of the largest changes in sentiment that we have seen in a while," says Nicole Sherrod, Managing Director of TDAmeritrade's Trading Group. "Our clients used the pullback in August as a buying opportunity, and we are pleased to see the retail investor use more sophisticated tactics and practice portfolio rotation."
Sherrod noted that clients continued to accumulate Tesla (TSLA), as the stock gained 26% month over month and traded at record levels and added to Ford(F) as the stock pulled back in August. Clients were net buyers of some basic materials companies including BP (BP), Kinder Morgan(KMP) and Potash (POT). Clients were net sellers of some financial names including Bank of America(BAC) and Goldman Sachs(GS). Both Apple(AAPL) and Facebook(FB) continue to be widely held, but our clients were net sellers of both names in August as their stock prices rose. Additional popular names sold included, Chesapeake Energy(CHK), Merck(MRK), and QUALCOMM(QCOM).
"We are also excited to introduce our new "fast" beta weighting within the thinkorswim platform to complement the traditional beta weighting calculation," Sherrod explains. "The calculation of fast beta uses one year of pricing data for the weighting symbol.This calculation is mathematically weighted such that more recent pricing behavior has a greater impact on the calculation than older pricing data. For example, NFLX has a traditional beta weighting of 0.77, while the fast beta weighting is 2.3. Momentum traders and long-term investors are really receptive of this new metric as a means of screening stocks."
For more information on the Investor Movement Index, including historical data and full monthly reports, please visit
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At the time of publication, Jill Malandrino held no positions in the stocks or issues mentioned.