TD Ameritrade, a broker-dealer subsidiary of TD Ameritrade Holding Corporation has revealed the Investor Movement IndexSM reading for August 2013.
The Investor Movement Index, or the IMX, is a proprietary, behavior-based index created by TD Ameritrade that aggregates Main Street investor positions and activity to measure what investors are actually doing and how they are positioned in the markets.
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The August 2013 Investor Movement Index for the four weeks ending August 30, 2013, reveals:
– Reading: 5.16 (compared to 4.87 in July)
– Trend direction: Positive
– Trend length: 1 month
– Score relative to historic ranges: High
August’s IMX reading marks a positive change in direction after a negative dip in July. Clients increased their equity market exposure in August, continuing a pattern of advancing exposure on market dips and rolling back exposure when equity markets were trading at record levels.
Clients seemed to anticipate a pullback, as they were net sellers of most market sectors in July even as the market continued to rise. When the S&P 500 fell almost five percent from a record high early in the month, TD Ameritrade clients treated the dip as a buying opportunity and ramped up their equity market exposure.
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By GlobalDataThis was reflected in the IMX as it raised above June 2013 levels. Like the last couple months, clients were net sellers of fixed income mutual funds and fixed income ETFs.
Nicole Sherrod, managing director of TD Ameritrade’s Trader Group, said: "It’s always encouraging to see our clients managing their equity market exposure. With an almost five percent drop in the S&P 500 in August, clients were poised to dial up their equity exposure.
"Clients were net buyers of some basic materials companies including BP (BP), Kinder Morgan Energy Partners (KMP) and Potash Corp (POT) that declined in August and were net sellers of some financial and technology names as their stock prices rose," he added.
As investors look to manage their portfolio risk, TD Ameritrade launched ‘fast’ beta weighting within the thinkorswim platform to complement the traditional beta weighting calculation. Beta weighting is a mathematical approach to measuring the historic behavior of a symbol or portfolio in relation to the broader market.
A direct output of the Investor Movement Index and unique to TD Ameritrade, fast beta weighting tunes the traditional calculation to use a more focused time frame, assigning greater weight to recent price movements than older price movements. Clients can analyze their portfolios with both traditional beta and the new fast beta feature, according to their preference.
The IMX value is calculated based on a complex proprietary formula. Each month, TD Ameritrade pulls a sample from its client base of 6 million funded accounts that includes all accounts that completed a trade in the past two months. The holdings and positions of this statistically significant sample are evaluated to calculate individual scores, and the median of those scores represents the monthly IMX.
