Dog Days, August Bears

If you think flows, liquidity, market depth and positioning matter, the outlook for US equities is somewhat foreboding. As most readers are likely aware, August can be challenging. For one thing, VIX seasonality's bullish, and what's bullish for vol tends to be bearish for stocks. Remember, volatility's inversely correlated with market depth. Liquidity dries up into vol expansions, setting up a self-fulfilling prophecy: Illiquid markets can exhibit a wider distribution of spot outcomes, which