The key ingredient that moves prices is volatility. Demand and supply, creates a market but price volatility moves it. In the past few weeks volatility has been scarce in the commodities and index markets. Volatility in forex has fallen significantly in the past few years. This development does not bode well for hedge funds which thrive on volatility.
However, they are partly responsible for pulling the plug on volatility. Many of the complex algorithms used by hedge funds depend on a number of interlocking variables that provide regular winning trades again and again. The success of the algorithm is the consistency and the fractal nature of markets. Whether they bet for 5 minutes or 5 months they will ensure a steady return.
The drawback of algorithmic trading is the inevitability that markets change over time. In the past hedge funds have been burned in moments of market change. This time they have learnt from the failed lessons of the past and have pulled the plug on the algos. Most traders are sitting on their hands. Maybe they are waiting for the World Cup to finish. Maybe there is some significant new around the corner that we are not aware of. The only real movement seems to be in treasuries. Who does that benefit ?