On my NT DOM, I always keep the cumulative volume (CV) on both bids and asks (across the 5 price levels) displayed. Previously, the CV would run consistently above 2000+ on each side, except prior to major news announcements. In recent weeks (with all this chaos in the markets), the CV is running less than 1000 per side (often in the 500 range), and the inside price volumes (at highest bid and lowest ask) are often only in 2 digits. Yet, we're certainly not lacking overall volume (as far as contracts executed per day). So what has changed? Are the computerized programs (run by hedgies and the big i-banks) no longer running? If so, what does that mean for us ES day traders who don't run black boxes? Good or bad? Personally, for scalping, I've found it much easier to get limit orders to fill, both on entry and exit.
Hedge fund redemptions. Until they are done liquidating at a fervish pace, we will not see much natural buying in this market. Buyers are mostly staying on the sidelines, or just holding intraday. It's getting at very extreme levels now, but we need a catalyst to end the cascade. Or a huge washout/crash.
I guess you're explaining the down bias to the market (i.e. lack of bids to hold price up), but I don't see that as an explanation of the lack of both bids and asks most of the day at almost all price levels. The ES had usually been running about an average of 500+ contracts at each of the 5 prices on each side at both the bids and the asks. Now, the TOTAL across all 5 prices on one side is often running around 500. It's like 80% of the bid/ask depth has disappeared even though overall volume executed is quite solid.