A recent Bloomberg article confirms the fragile condition of the market. Don’s recent post talked about how algorithmic trading is causing a lack of liquidity that contributes to volatility spikes.
This article confirms that the volatility spikes are occurring without the simultaneous spikes in stock volume that you might usually expect.
The author, Rachel Evans, highlights the negative correlation between volatility and liquidity. That liquidity appears to be declining is something that has us very concerned, despite the turnaround after Monday’s rout.
