Investor Movement Index for September 2016

Major stock indices approached or achieved all-time peaks last month and retail traders didn’t miss out, raising their stock exposure to two-year highs in September.

For the second-straight month and the fifth month in the last six, retail traders tracked by TD Ameritrade were net buyers of stocks, according to the Investor Movement Index®, or the IMXSM. The IMX climbed to 5.49, up from 5.26 the previous month, and is now up approximately 25% from the 52-week low recorded earlier this year. The last time the index was above current levels was two years ago, in September 2014. It then fell to as low as 4.33 last March before beginning its current march upward.

September’s 4.37% rise in the index from August was a bit more subdued than the previous month’s 12% jump. But looking at the data, there’s little doubt that retail investors have had more appetite lately for stocks, especially those that are a little beaten down or offer attractive yield. And market volatility remained low in September, despite a brief spike in the middle of the month prior to the Fed meeting, which kept relative volatility of widely held positions elevated. This activity, in concert with the net buying, resulted in an uptick in the exposure in TD Ameritrade client accounts.

When a trading method works, I like to stick with it, and that’s basically what retail traders have done in recent months. For the most part, they’re not charging in to buy stocks that are achieving new highs. Instead, they’ve taken profit on some of those names and instead seem to be looking for good dividend opportunities and stocks that have fallen out of favor for one reason or another. For instance, September saw retail traders become net sellers of Apple Inc AAPL, whose stock price reached a multi-month high during the month, even as they became net buyers of Bristol-Myers Squibb Co BMY, a stock that recently took a big dive.

That doesn't mean the booming tech sector was out of favor with retail investors last month. Not a chance. Dividend stocks, tech stocks, and health care stocks all appear on the list of names most widely sought by retail traders in September. To learn more about IMX, watch the video below.

Remember, this sophisticated index is a tool that lets you see what hundreds of thousands of actual traders were doing in September across all markets. Retail traders now have the biggest exposure to the stock market in two years, but with the U.S. election, Q3 earnings, and the possibility of a late-year Fed rate hike, stay tuned to see if this optimism continues in October.

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