"I've been in this business for about 15 years, and one of the
things that always drives me crazy is when the media and others
refer to individual investors as the 'dumb money,'" says Nichole
Sherrod, Trading Group Managing Director at
Now Sherrod has a tool to help prove her point. Launched in
January, the new Investor Movement Index, called the IMX, measures
the trading sentiment of retail investors who use TD Ameritrade's
brokerage services. The IMX was designed to be an additional
analytical tool for investors, but also, as Sherrod told us, "to
put forth empirical data that can show exactly what these investors
are doing to really debunk the notion that they're the dumb money."
The index takes a monthly sample of TD Ameritrade clients and
measures their holdings and positions in a process similar to beta
weighting, which takes into account the percentage of each position
in a portfolio to analyze risk and profit. So, for the IMX, each
investor's portfolio is given a score; the median of all the
individual scores is the IMX number for the month. There is no
threshold for bearish or bullish sentiment, but the index is meant
to be analyzed month-over-month, and against major indices, as a
The latest IMX score, for June, came in at 5.15, representing a
2.59% increase over May. As the
(INDEXSP:.INX) index dropped 6% lower than its May high, the IMX
jumped as Ameritrade clients returned to the market for a buying
opportunity. This followed two consecutive months of decline in the
IMX, while the S&P 500 steadily rose. "Through April and May,
clients were dialing back their exposure because there was a lot of
chatter about the anticipation of a pullback," says Sherrod. And a
pullback there was.
) was one of the most-purchased stocks while the electric car
company's stock continued its rally. Sherrod points out that
investors had been building positions in Tesla since the beginning
of the year, playing part in the stock's rally well before its big
surge in May from $53.28 on May 1 to $110.33 on May 28.
Clients were also net buyers of government-sponsored mortgage
) following a significant spike and decline in May for both
) was a heavily bought stock as it traded down toward new lows for
the year in June, signaling that clients feel the social network
company holds more value than its current stock price suggests.
On the sell side, taxable and municipal bond
and mutual funds were heavily sold through June. Tech stocks like
(CSCO) also saw more sales than purchases, which Sherrod explained
simply as rotation.
As for the ambitions of the IMX, Sherrod told us:
(ADP) releases monthly private sector employment data, our vision
for the index is to replicate that model, to show the Street, on
a monthly basis, exactly what retail investors are doing. We get
so many questions on a regular basis, like, "What's the
individual investor thinking? Are they bullish or are they
bearish? What's their sentiment?" Those are the kind of questions
this is designed to answer.
The IMX is updated monthly and can be viewed
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Disclosure: MVP, a division of Minyanville, Inc., has a
business relationship with TD Ameritrade.