The February 2015 Investor Movement Index for the four weeks ending February 27, 2015, came in at 4.70, compared to 4.85 in January. The trend direction is negative with the trend length at 2 months. February's score relative to historic ranges is "Middle."
TD Ameritrade clients' exposure to equity markets declined for the second month in a row, resulting in an IMX reading of 4.70-a new two-year low.
The February IMX period saw increases in U.S. equity markets along with a decline in volatility. The S&P 500, Dow Jones Industrial Average, NASDAQ, and Russell 2000 indexes all posted gains greater than 4 percent for the period, with the NASDAQ ending the month within 2 percent of its all-time high. An easing of tensions surrounding the Greek debt crisis in Europe, Federal Reserve testimony that reaffirmed patience in raising rates, and a slight rebound in oil prices early in the month seemed to reduce volatility and boost the markets.
TD Ameritrade clients were net sellers of equities in dollar terms over the month of February. This net selling was not the only contributor to the decline in the IMX, however; some widely held companies saw declines in volatility relative to the S&P 500, and this also helped to lower this month's IMX reading. The result of all of this activity was a reduction in equity market exposure among client portfolios and a more cautious portfolio posture. Top holdings remained stable and clients continue to favor Apple , Facebook , AT&T, and General Electric.
"This month's reading is unique in that our clients were net sellers," said Nicole Sherrod, managing director of the trader group, TD Ameritrade. "In the months prior, the score was driving lower because they were rotating into lower beta positions. This month's score suggests more acute bearishness."
Oil producers remained popular in February, as Exxon Mobil Corp. and Chevron Corporation were net buys. GoPro, Inc. and Alibaba Group, both familiar names who had their initial public offerings over the last year, saw declines in their prices in February and were also net buys. Apple Inc. was also a net buy, as it announced it would reveal a new product in early March.
February saw net selling in Amazon, Netflix, and Twitter. Each saw their prices rise to levels of resistance during the month. Clients appeared to take profits in Boeing, whose stock price jumped higher following their earnings announcement at the end of January; the stock continued to climb in February. Sirius XM and JC Penney, both lower-priced names who have been popular with traders in the past, were also net sells.
The Investor Movement Index, (or the IMX) is a proprietary, behavior-based index created by TD Ameritrade designed to provide insight into Main Street sentiment. It measures what investors are actually doing, and how they are actually positioned in the markets. The IMX does this by using data representing the holdings/positions, trading activity and other data from an anonymous sample from six million funded accounts. These data are used to create a snapshot that can be monitored over time, or compared to other market indicators, to suggest the current sentiment of the real portfolios held by retail investors.
Wall Street often looks to TD Ameritrade, one of the largest online brokerage firms for insight into the mood, sentiment, and behavior of retail investors. Up to now, Wall Street has largely relied on opinion surveys - which measure what investors are thinking or what they're saying - to provide this information. With six million funded client accounts spanning investors of all ages, account sizes, and experience levels, TD Ameritrade is in a unique position to offer a quantitative, behaviorâ€based index that can better reflect what investors are actually doing.
The IMX can provide insight into whether investors are growing more bullish or bearish on equities.
The IMX measures the level of exposure of Retail Investor Portfolios to the U.S. equity market. The IMX has not been indexed to a specific year or normalized. Scores should be viewed in the context of historic ranges and recent trends. When reviewing month over month results and trends over time it's most important to put IMX values into context by considering historical ranges. For example, the historical range can be put into 5 quintiles - High, Moderately High, Neutral, Moderately Low and Low. The higher the score is the more bullish the level. Other important considerations include recent trends up/down and the duration of trends.