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E-Mini S&P500 Futures Volatility Forecast (19/09/2011)

E-Mini S&P500 futures opened at 1,163 on Monday, rose to 1,171 on Tuesday, jumped to 1,187 on Wednesday, achieved 1,211 on Thursday and closed at 1,214 on Friday.

The actual volatility is 1.4% (22.2% annualised), which is still a fairly high value if we consider an average fluctuations rate of 0.7% – 0.8% (11.1% -12.6% in annual terms), but the slope of the curve is now clearly downward sloping. Hence, the upcoming days should see an ulterior flattening of the conditional variance which, ceteris paribus, should complete the mean reverting process and settle around the abovementioned average values.

The current week does not present much macro-economic news coming from the States, apart from the FOMC announcement, and as a consequence most of investors’ eyes will focus on the European sovereign debt crises.

The HyperVolatility team is moderately bullish E-Mini S&P500 futures because, should the volatility keep in its downward trend, the price could touch the 1,230 – 1,240 by Friday.

The market remains highly unstable and any bad news coming from European politicians is going to provoke a short term sell-off which would completely twist our analysis.

VIX Index Volatility Forecast (19/09/2011)

The VIX Index opened at 38.59 on Monday, dropped to 36.91 on Tuesday, plunged to 34.6 on Wednesday, settled at 31.97 on Thursday and closed at 30.98 on Friday.

The current volatility is 7.5% (25.9% monthly) and the TGARCH chart is showing a volatility curve which is quite close to its long term equilibrium point and therefore about to complete its mean reverting process. The last week saw some ups and downs in volatility, which are evident in the very last part of curve, but a break through the 7% level (24.2% monthly) should signal an ulterior drop of the oscillation rate and a potential settlement of the latter around the 4% threshold (13.8% monthly).

The HyperVolatility team is moderately bearish the VIX Index because the overall movement is still pointing towards a total retracement of the volatility towards it long term equilibrium point. Consequently, the VIX should touch the 25% area by the next Friday but, given the actual market conditions, short term bursts of the volatility are very likely to occur.

Even in this case the FOMC statement is going to play a key role.

E-Mini Nasdaq Futures Volatility Forecast (19/09/2011)

E-Mini Nasdaq futures opened at 2,196 on Monday, jumped to 2,220 on Tuesday, rose to 2,250 on Wednesday, achieved 2,291 on Thursday and closed at the same price on Friday.

The current volatility is 1.3% (20.6% annualised) and the TGARCH plot is clearly displaying a downward sloping curve which implies that the upcoming days could see a diminished rate of volatility and welcome a recovery of the price action. However, this level proved to be a strong support level in the past and a failure to break through the 1.1% – 1.2% area (17.4% – 19% in annual terms) would probably signal that the volatility could keep going up and eventually retest the 2% area (31.74% annualised).

The HyperVolatility team is moderately bullish E-Mini Nasdaq futures because the decrease in the conditional variance should keep the price action up. Specifically, there is a chance that the 2,350 – 2,370 area get retested before the end of the week but the movement is likely to be very weak and choppy.

The fact that the volatility is diminishing does not mean that short term retracement of futures prices are to exclude. The nervousness amongst investors is palpable and any negative news could change the direction of this fragile market.

Needless to say that the FOMC statement is going to play a key role this week and it is definitely worth watching.

VXN Index Volatility Forecast (19/09/2011)

The VXN Index opened at 37.97 on Monday, dropped to 36 on Tuesday, plunged to 33.36 on Wednesday, touched 30.67 on Thursday and closed at 29.36 on Friday.

The current volatility is 6.1% (21.1% monthly) and the volatility curve seems now ready to complete its mean reverting journey which should end around the 4% – 4.5% threshold (13.8 -15.5% monthly) although some short term retracements are still likely to occur over the next trading hours.

The volatility of the VXN Index is clearly signalling that in the upcoming hours the implied volatility of the Nasdaq100 options should diminish but such a scenario is going to hold only if the concerns regarding European debt are going do not unleash an ulterior sell off.

The HyperVolatility team is moderately bearish the VXN Index which could eventually retest the 25% level by Friday. Nevertheless, the likelihood of a short term explosion of the conditional variance remains pretty high because despite the numerous meeting European politicians appear unable to come up with a concrete plan which would save Greece and prevent a domino effect which would destroy the entire old continent economies.

DJ EuroStoxx50 Futures Volatility Forecast (19/09/2011)

DJ EuroStoxx50 futures opened at 2,022 on Monday, rose to 2,047 on Tuesday, touched 2,113 on Wednesday, jumped to 2,176 on Thursday and closed at 2,152 on Friday.

The current volatility is 3.3% (52.3% annualised) and the TGARCH plot is manifestly showing a volatility curve which is moving sideways although still trading in a very high range. The downward inclination of the slope seems suggesting that the upcoming trading days will see an ulterior decrease of market oscillations and that the mean reverting process will finally start to become more and more evident.

The concerns surrounding Europe and in particular Greece are still pretty high amongst investors, however, the decrease in the fluctuation rate is signalling that some investors became more optimistic about the future of the Single currency after the statement that “Greece will remain in the Eurozone” (at least according to Nicolas Sarkozy and Angela Merkel).

The HyperVolatility team is moderately bullish DJ EuroStoxx50 futures because an ulterior drop in the conditional variance could easily support the price action which could head north during the hours and eventually retest the 2,250 area.

On the other hand, the rise in price is going to be very weak and the fact that the volatility curve is still trading around the 3% area implies that the risk of sharp retracements remains concrete.

German Bund Futures Volatility Forecast (19/09/2011)

German Bund futures opened at 138.1 on Monday, dropped to 137.5 on Tuesday, plummeted to 136.7 on Wednesday, touched 136.1 on Thursday and closed at 136.7 on Friday.

The current volatility is 0.58% (9.2% annualised) and the TGARCH plot is displaying a downward sloping curve which is trying to complete its mean reverting process towards the 0.4% – 0.45% threshold (6.3% – 7.1% in annual terms). The drop in the conditional variance is a strong signal that the buying pressure is now in a downtrend and that the next trading days could see both a softening of the oscillation rate and a slow decrease of futures prices.

German Bund futures have been heavily bought by investors seeking protection against equity markets storms but an ulterior plunge in the volatility curve is a strong signal that the buying pressure is now diminishing (for a more precise explanation of the relationship between German Bund futures and volatility please watch our video-research on our HyperVolatility Channel).

The HyperVolatility team is moderately bearish German Bund even if we reckon that a sharp drop in futures prices is quite unlikely. The market will probably retest the 135 area by Friday but a sideways movement should dominate the upcoming trading hours.

Some short term opportunities could come during the FOMC announcement as many traders will attempt to buy Bund futures in order to avoid violent price shocks in risky markets.

E-Mini Crude Oil Futures Volatility Forecast (19/09/2011)

E-Mini Crude Oil futures opened at 88.8 on Monday, retested the 89.95 resistance on Tuesday, dropped to 88.55 on Wednesday, achieved 89.22 on Thursday and closed at 87.85 on Friday.

The actual volatility is 2% (31.7% annualised) and the TGARCH plot is showing a fairly stable volatility curve which is now trading within its medium term average. Nevertheless, the actual level is still extremely high if compared to the average volatility of this market and the fact that the curve is slightly upward sloping could imply that a higher fluctuations rate should be expected in the upcoming hours although the augment should not be critical.

The long term picture is still highly bearish and the fact that the conditional variance is now trading sideways on its equilibrium point could signal that an increased degree of market fluctuations should be expected in the upcoming trading hours.

The HyperVolatility team is bearish E-Mini Crude Oil futures because the volatility curve is probably going to head north in the next hours whilst the price should touch the 83-84 area by Friday.

Needless to say that the FOMC statement can change the overall picture but the high pressure on the Single currency is going to indirectly influence oil prices.

Euro Futures Volatility Forecast (19/09/2011)

Euro futures opened at 1.3653 on Monday, touched 1.368 on Tuesday, rose to 1.375 on Wednesday, jumped to 1.3881 on Thursday and settled at 1.3788 on Friday.

The actual volatility is 0.7% (11.1% in annual terms) and the TGARCH plot is evidently displaying a sharply downward sloping curve which is now trying to get back to the 0.6% level (9.5% annualised). However, it is worth noting that the volatility, at least over the last week, has been closely following the price action giving birth to a symmetric leverage effect although the big spike has been primarily caused by the big drop which dragged futures prices from 1.41 to the 1.37 area.

The great uncertainty which is surrounding financial markets is mainly due to Europe and its future therefore many traders will probably keep the exchange rate at historically low level unless concrete measures to avoid Greece’s default and prevent sovereign debt contagion will be taken.

The HyperVolatility team is moderately bearish Euro futures because the drop in volatility, in this case, will accompany a further depreciation of the Single currency against the Dollar. Therefore, the 1.3400 – 1.3450 threshold could be retested before the end of the week but the FOMC announcement on Wednesday could twist the scenario.

Swiss Franc Futures Volatility Forecast (19/09/2011)

Swiss Franc futures opened at 113.4 on Monday, rose to 113.6 on Tuesday, jumped to 114.1 onWednesday, achieved 115 on Thursday and settled at 114 on Friday.

The actual volatility is 0.81% (12.8% in annual terms) and the chart is manifestly signalling that the Swiss Bank intervention managed to prevent its currency from appreciaitng too much. However, the big drop in market fluctuations has been followed by a sideways movement of  the conditional variance whose curve is now slightly upward sloping but the situation is likely to remain so even during the next hours.

The intervention of the Swiss National Bank “distorted” the price action and the massive drop in price scared away many investors which are now reluctant to place large buy orders although the Swiss Franc stadily remains one of sa havens during equity market turmoils.

The HyperVolatility team is moderately bullish on Swiss Franc futures because a short term increase of the price is likely to occur even though there is a high probability of sideways movements. Hence, we believe that the 115 -116 threshold will be retested before Friday but a break through this level is quite unlikely because the concerns about an ulterior interference of the Swiss monetary authority would augment.

British Pound Futures Volatility Forecast (19/09/2011)

British Pound futures opened at 158.4 on Monday, dropped to 157.77 on Tuesday, closed at 157.71 on Wednesday, jumped to 158 on Thursday and settled at 157.9 on Friday.

The current volatility is 0.54% (8.5% in annual terms) but the volatility curve seems to have reached a mean reverting point and it looks like that the upcoming trading days will probably see a softening of market fluctuations. However, British Pound futures went through a bearish week, that caused the conditional variance to increase, and the fact that the volatility is now ready to decrease is signalling that the down move is likely to be over.

The fact that the conditional variance is still high means that some short term bursts are still possible, however, the overall week should see British Pound futures in a shy uptrend. Consequently, the 1.60 area could be eventually retested by the end of the week.

Finally, the FOMC statement on Wednesday remains the key event of the week and should be carefully monitored.

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