By TD's logic, this strong retail buying should signal more good times to come. They argue that the way they constructed the measure makes it more of a predictive mechanism. Many retail sentiment measures tend to have a contrarian reputation on the premise that by the time the regular investor has caught on to a bullish trend, it's too late and the real pros have started selling.
But back when the IMX Index was last above 5 in June 2011, the S&P 500 was just starting to turn and embark on a second-half rally, proving TD's theory correct (at least in that one case).
Apple, Intel and Facebook all had rough a February, finishing in the red while the rest of the market increased. Yet, all of those names are popular trading stocks with strong brand names and investors bought them on hopes they will catch up to the rest of the market.
Investors sold recent top performers like Netflix and JPMorgan Chase, according to TD data.
The monthly index measures 6 million funded accounts. Traders that act more frequently or use margin are scored with a higher intensity in the index.
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