Market Overview

Investor Movement Index February Summary

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The IMX increased for the first time in five months, moving higher by 7.24% to 4.59 from the previous month's score of 4.28.

TD Ameritrade clients were net buyers overall during the February period, but favored less risky assets, including fixed income, while selling equities. The increase of the IMX during the period was caused by increasing relative volatility among widely held names, including General Electric Company (NYSE: GE), Facebook, Inc. (NASDAQ: FB), and Microsoft Corporation (NYSE: MSFT). Market volatility was generally low during the period. The Cboe Volatility Index, or VIX, which measures volatility of the S&P 500 Index, increased above 20 during the first day of the period, then trended lower for the following three weeks.

Equity market returns were once again positive during the February period. The S&P 500 increased 4.8%, while the Dow Jones Industrial Average and Nasdaq Composite were both up in excess of 5%. The Nasdaq exited a bear market during the period, rebounding 20% from its Christmas Eve lows. For the second month, rising optimism around U.S.-China trade negotiations propelled stocks higher, while earnings from many technology behemoths proved better than many investors expected. Additionally, the Federal Reserve held its benchmark rate unchanged, and delivered its strongest recent statement that further rate increases are on hold.

Trading

TD Ameritrade clients were net sellers of equities overall, but did find some names to buy during the period. For the 8th period in a row, Amazon.com, Inc. (NASDAQ: AMZN) was a net buy. The company beat earnings estimates early in the period, and announced plans to cancel HQ2 in New York. Auto companies Ford Motor Company (NYSE: F) and Tesla Inc. (NYSE: TSLA) were both net buys during the period. F announced it would exit its heavy truck business in South America, while TSLA missed on earnings, but announced it started delivering Model 3 cars in China ahead of schedule. Altria Group Inc. (NYSE: MO) traded higher during the period after receiving a positive analyst note regarding its JUUL investment, and was a net buy. CVS Health Corp. (NYSE: CVS) was a net buy after the stock fell nearly 10% at month-end after the company revised earnings estimates downward for 2019.

Additional popular names bought include AT&T Inc. (NYSE: T) and Microsoft.

Facebook was net sold once again as the company beat on earnings and announced an agreement with the NBA to stream game recaps on Facebook Watch. Alibaba Group Holding Ltd. (NYSE: BABA) moved higher during the period, with the company announcing a sizeable investment in investment bank China International Capital Corp., and was net sold. Big banks Bank of America Corporation (NYSE: BAC) and Citigroup Inc. (NYSE: C) were net sold, with both stocks essentially flat during the period following concerns regarding the yield curve. Procter & Gamble Co. (NYSE: PG), which traded higher for five consecutive weeks to reach an all-time high, was also net sold. Chipotle Mexican Grill, Inc. (NYSE: CMG) beat on earnings and passed the $600 mark for the first time since 2015, and was net sold. Oracle Corporation (NYSE: ORCL) was net sold as the company approved an additional $12 billion share buyback and the stock traded higher by over 5% during the period.

Additional names sold include Home Depot Inc. (NYSE: HD), Celgene Corporation (NASDAQ: CELG), and Vale S.A. (NYSE: VALE).

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.

Historical Overview

TD Ameritrade's Investor Movement Index (IMX) has generally correlated with the S&P 500 as clients react to equity price movements, but the index has gone through uncorrelated periods. Beginning in January 2010, when TD Ameritrade started tracking the IMX, the index rose with equity markets until April 2010, when it peaked at 5.40. In May 2010 investors experienced the "Flash Crash" and the IMX began a sharp downward trend. The IMX didn't reach 5.00 again until the S&P 500 was well above April 2010 levels. The index eventually peaked at 5.56 in June 2011. This peak was immediately followed by a plunge in equity markets, and in the IMX, as the media was dominated by the U.S. debt ceiling debate, S&P downgrade of U.S. debt, and European debt concerns. The S&P 500 began to recover in the fall of 2011, but the IMX continued to decline until it reached a new low at the time in January 2012. As the S&P 500 began to sustain an upward trend in early 2012, the IMX started to rise. In 2013, as economic conditions improved and the S&P 500 climbed to record levels, the IMX rose to the high end of its historical range, finishing 2013 at 5.62, and continued to rise in 2014 amid geopolitical tensions related to Ukraine and the Middle East, until seeing slight declines in October and November. By the middle of 2015 the IMX had seen increases, as equity market volatility had reduced to near historical levels while the market continued its upward trend. As 2015 ended its third quarter, volatility had returned to markets, as global economic concerns and speculation around the timing and trajectory of Federal Reserve rate increases seemed to rattle overall equity markets. This uncertainty continued to play a role in the equity markets through the fourth quarter of 2015 and into early 2016. The volatility accompanying this uncertainty abated in the second quarter of 2016 and remained low until late in the third quarter. Just as it had in 2015, the IMX saw increases mid-year during the period of lower volatility. The IMX continued to climb into the fourth quarter reaching 5.83 in October 2016, its highest point in two years. A brief spike in volatility during November, timed around the U.S. presidential election, coincided with a slight pull back in the IMX, which then ended 2016 at the high end of its historical range. The IMX started 2017 with an upward trend and reaching an all-time high in March, before pausing in April as lower volatility lead to a decrease in the IMX. The momentum resumed in May, with the IMX breaching 7.0 for the first time ever in July of 2017. The IMX took another brief pause in September, before following markets higher and breaching 8.0 for the first time ever in November and ending 2017 at an all-time high. Volatility returned to the markets in early 2018, and the IMX decreased for four consecutive months to start the year. The IMX then rebounded in the spring of 2018, and continued higher during the summer on the back of better-than-expected earnings and increasing equity markets.

Historical data should not be used alone when making investment decisions. Please consult other sources of information and consider your individual financial position and goals before making an independent investment decision.

All investments involve risk including the possible loss of principal. Please consider all risks and objectives before investing.

Past performance of a security, strategy or index is no guarantee of future results or investment success.

The IMX is not a tradable index.

The IMX should not be used as an indicator or predictor of future client trading volume or financial performance for TD Ameritrade.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

Posted-In: IMX Investor Movement Index TD AmeritradeNews Markets General

 

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