Investor Movement Index (IMX) for May 2016

Sell in May? Apparently not if you’re a retail trader this year.

Retail traders tracked by TD Ameritrade jumped back into equities in a big way last month, making a dramatic break from the bearish to neutral stance they’d adopted earlier in the year, according to the Investor Movement Index®, or the IMXSM. In doing so, they reached for some downtrodden names but still shied away from one particular sector.

The IMX rose sharply to 4.87 in May, up from 4.41 in April and the largest single-month increase in the history of IMX. Because the IMX measures portfolio volatility relative to overall market volatility, rising volatility of some of the more widely held positions paired with relatively stable market conditions further increased the IMX. It was the second month in a row of IMX gains, following a very small gain in April. The index dipped as low as 4.33 earlier this year, and remains well off its 52-week high of 5.39.

In the accompanying video, you’ll get my take on the May IMX reading and learn which stocks retail traders were buying and selling during the month. You’ll also learn about a couple of stocks that retail traders sold in May after piling into them earlier this year.

If you’re wondering what stocks retail traders scooped up last month, think about some corporate names that play a big role in everyday life, including both information technology and consumer discretionary. These companies, one of whom seems to have a store on every other corner here in Chicago, have been under a bit of price pressure lately, but retail traders often zero in on names they believe represent bargains, as they did when they bought energy stocks earlier this year. The energy sector was recently up more than 10% year to date, so maybe retail traders are onto something.

Remember, this sophisticated index is a tool that lets you see what hundreds of thousands of actual traders were doing in May across all markets. Retail traders were cautious earlier in the year, but they seem to have gained more confidence as spring advanced. Could this be the sign of market strength this summer? Let’s wait and find out what June brings.