VIX is an index that measures overall market volatility. After spiking earlier this year, this measure is calming down. What is not is sector and individual stock volatility. Some individual intraday movements as well as day-to-day movements seem off the charts. The question is why. At least part of the answer has to do with the fact that the overall market is not seeing inflows of new money; in fact, money flows are currently negative.

Flat or negative money flows imply that money moving into one sector or stock comes from others. So, the averages make little progress, but sectors and certain stocks can have intense movement. Hedge funds, short-term traders, and others are all moving money around trying to catch short-term moves. These movements are creating this volatility we are describing.

Investors trying to understand what is behind any stock move may have an exercise in futility. Yes, sometimes there are reasons, but in this environment the stock reaction can easily be exaggerated.

Don’t let these moves throw off your conviction based upon good research and reasoning; stay steady, my friends.

El Solo Toro