TD Ameritrade's Investor Movement Index (IMX) For February 2017

The rally train rolled throughout February and retail traders stayed on board for the ride, increasing their equities exposure to a new all-time high.

Retail traders tracked by TD Ameritrade were net buyers of stocks in February for the second-straight month, according to the Investor Movement Index^®, or the IMX^SM. The February reading climbed to an all-time high of 6.15, up from 5.71 in January, amid broad-based buying interest that embraced a number of different sectors. The previous all-time high of 5.87 was posted in March 2014.

Net buying of equities, along with some widely held names seeing their volatility rise relative to the overall market, helped lead IMX to its new high. Volatility—as measured by VIX—fell below 10 during the period, setting a 10-year low

Though a record high in itself is always notable, it’s also illuminating to compare February’s retail investor optimism with the one-year low of 4.33 recorded last March. That reading was the lowest in four years amid decade-low oil prices, slumping European and Asian economies, and a sluggish U.S. earnings environment.

Retail investors’ increased exposure to stocks came as equity indices posted a series of record highs in February, showing that investors tracked by IMX have aligned themselves with the market trend. That’s a bit of a reversal from late last year, when the IMX declined for two-straight months during the market’s post-election rally. At that time, it seemed that many retail investors were lining up in a contrary position to the wider market, looking to take profit as some stocks reached new highs.

While some high-flying stocks still drew selling interest from retail traders in February, optimism apparently won the day, perhaps due to improved earnings as well as anticipation of infrastructure spending and tax reform under the new administration in Washington, D.C.

Buying interest ranged across sectors, from info tech to financials; from energy to health care. Amazon.com, Inc. AMZN, which reported better-than-expected earnings, was a net buy. And banks remained popular, with JPMorgan Chase & Co. JPM and Bank of America Corp BAC being net buys. Chesapeake Energy CorporationCHK, which has been under pressure following natural gas prices trending lower, was another net buy. Teva Pharmaceutical Industries Ltd (ADR) TEVA and Macy's Inc M, both of which reported upbeat earnings, were also net buys.

Additional popular names bought included DryShips Inc. DRYS and Ford Motor Company F.

Once again, Apple Inc. AAPL, the most widely held name among investors at TD Ameritrade, was a net sell among retail traders tracked by IMX. Shares of AAPL hit all-time highs during February, so perhaps many traders decided it was a good time to take profit. And AAPL wasn’t the only stock that had recently made new highs to come under selling pressure by retail traders. Walt Disney Co DIS and Yahoo! Inc. YHOO both posted new 12-month highs and also saw net selling. Tesla Inc TSLA was net sold after reaching a new all-time high in the middle of the period.

In the accompanying video, you’ll get further insight on the February IMX reading, and learn more about which other stocks retail traders were buying and selling during the month.

Remember, this sophisticated index is a tool that lets you see what hundreds of thousands of actual traders were doing in February across all markets. Can the IMX set another new record in March? Or will retail traders back off a bit from their buying ways? The last time IMX reached an all-time high, three years ago, retail investors followed up by reducing their market exposure over the next year. But as we often say, past isn’t necessarily prologue.

Click here for a copy of the report.