Liquidity On, Liquidity Off
For those of you that think that the market's current price action
and attendant volatility is a direct result of headline risk out of
Europe, or general economic uncertainty, you might want to think twice.
The 3 day break that began with the market topping out at ~1190.00 on
Tuesday afternoon, culminating in this afternoon's swing bottom at
~1133.50, most certainly belies that assumption.
Please note how the market was run up each of the 3 ETH sessions and how the market was taken down each of the 3 RTH sessions. What's especially interesting about this pattern is the way in which this strategy is implemented.
Notice how the relative volume drops off Wednesday and Thursday right before the market sells off, and continues to remain low during the duration of the move. This demonstrates how the algos pull liquidity on the down moves in order to allow the market to fall.
It is this pulling and adding of liquidity that is the major cause of the recent increase in volatility. By observing these patterns of on-again/off-again liquidity states,, along with price action patterns, one can gain a much better understanding of how the market actually operates.
Please note how the market was run up each of the 3 ETH sessions and how the market was taken down each of the 3 RTH sessions. What's especially interesting about this pattern is the way in which this strategy is implemented.
Notice how the relative volume drops off Wednesday and Thursday right before the market sells off, and continues to remain low during the duration of the move. This demonstrates how the algos pull liquidity on the down moves in order to allow the market to fall.
It is this pulling and adding of liquidity that is the major cause of the recent increase in volatility. By observing these patterns of on-again/off-again liquidity states,, along with price action patterns, one can gain a much better understanding of how the market actually operates.
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