TD Ameritrade Investor Movement Index Rises In March as Investors Snap Up Equities

T.D. Ameritrade's proprietary equity flow indicator rose in March to the highest in 21 months as stocks, measured by the broad U.S. equity indices, rose to all-time highs. Bullish sentiment emanating from better than expected economic data for much of the first quarter as well as continued global central bank easing helped to send investors back into equities.

For the month of March, the TD Ameritrade IMX rose to 5.37 from 5.14 in February as of March 28, a 4.47 percent month-over-month rise. The rise in the index marks a 21-month high and a second consecutive month that the index has printed above 5. Historically, the index has oscillated between 3 and 6 as stocks have risen and fallen, so it is in rather bullish territory as it approaches 6.

The Investor Movement Index, or the IMX, is a proprietary, behavior-based index created by TD Ameritrade designed to indicate the sentiment of retail investors' portfolios. The IMX does this by using data including holdings/positions, trading activity, and other data from a sample of six million funded client accounts. This data is 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.

However bullish the data may appear, it does not encompass the previous trading week which saw some negative economic indicators create fear in the market and send stocks slightly lower. Report such as the both the ISM Manufacturing and Non-Manufacturing Indexes as well as the ADP Employment Survey and the Non-Farm Payrolls Report all showed a sudden, unexpected, and abrupt slowdown in the economy in March after two months of strong growth to begin the first quarter.

Looking forwards, sentiment should shift its focus from the macroeconomy to the microeconomy in April as second quarter earnings season kicks off. Earnings from Dow components and economic bell-weathers Alcoa AA and J.P. Morgan Chase JPM are expected this week with many more earnings to follow throughout the rest of April.

For a full preview of this week's expected earnings releases, check out Benzinga's Earnings Expectations for the Week of April 8.

The index can be a useful tool for investors because, rather than other investor surveys that rely on qualitative, survey responses, the index uses actual trading data from TD's plethora of clients to create an accurate snapshot of the broad retail investor. Also, the methodology weights accounts equally regardless of size, meaning that small and large investors alike are counted democratically.