Bring It On: Investors Bullish During June Pullback
Investors showed no fear during the June stock market pullback, aggressively buying the dip and getting even more bullish by the end of the month than they were before it started, according to TD Ameritrade data on the largest pool of retail traders.
While many professional managers sold stocks as Ben Bernanke's comments sparked an alarming back up for interest rates, retail investors remained steadfast in their bullishness, seeking out stocks they believed to hold a value opportunity.
"Our clients got the correction they were looking for and increased exposure into the end of the month," said Nicole Sherrod, managing director of TD Ameritrade's Trader Group.
The firm's IMX Index, which uses a proprietary formula to gauge the sentiment of its active clients, rebounded from a 5.02 reading in May to a 5.15 level in June, just below the uber-bullish readings in March and April. Anything above 5 is considered bullish.
The S&P 500 dropped almost 6 percent last month from its high recorded in May as the Federal Reserve chairman indicated the central bank may taper its quantitative easing program earlier than expected.
Since those comments, the 10-year yield has climbed to 2.75 percent, the highest since August 2011. Investors fear the jump in yields will hit the housing market, along with the easy source of funds companies have used to buy back stock, invest, etc.
Retail's quick buy trigger may be proven right as the S&P 500 has rebounded to within 3 percent from its record high. A stronger-than-expected June jobs report on Friday supported the thesis that the economy is ready to stand on its own without the Fed's crutch. That theory will be put to the test further this month as companies report second-quarter results.
TD Ameritrade has 6 million funded accounts from which it pulls this data. Its monthly IMX measure uses a complex formula of those investors which completed at least one trade and weighs more heavily active investors who use leverage. After years of back testing, they officially launched this index and data pool in January.
Some other notable tidbits from this unprecedented look into retail trading activity include a continued interested in buying momentum play Tesla. Investors were also net sellers of gold last month as the metal plunged because of the higher rates and a stronger dollar. Interestingly though, they were net buyers of silver.
—By CNBC's John Melloy. Follow him on Twitter @CNBCMelloy.