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Japanese Yen Futures Volatility Forecast (19/09/2011)

Japanese Yen Futures opened at 129.1, rose on 130 on Tuesday, touched 130.45 on Wednesday, achieved 130.48 and closed at 130.1 on Friday.

The volatility is now 0.51% (8% annualised) and the TGARCH plot is showing a slightly upward sloping curve which seems to suggest that the upcoming trading hours will see an increase in the fluctuations rate which a consequent drop of the price action.

The concerns about Europe and the great uncertainty surrounding the destiny of Greece , which seems to be really on the brink of collapse, would probably push investors towards safe haven again, if they have ever left them at all, implying that the buying pressure could augment and lift Japanese Yen futures as well as the volatility curve.

The HyperVolatility team is bullish Japanese Yen futures because the symmetric effect between volatility and price action during turmoil is an indication that the buyers will probably get back into the game and purchase some more assets in order to diversify the risk of their portfolios. Hence, we believe that futures prices should increase and eventually retest the 132 threshold by Friday.

The FOMC statement on Wednesday could potentially change the picture should new monetary policies being released.

E-Mini S&P500 Futures Volatility Forecast (06/09/2011)

E-Mini S&P500 futures opened at 1,208 on Monday, tested the 1,204 level on Tuesday, achieved 1,219 on Wednesday, plunged to 1,201 on Thursday and closed at 1,169 on Friday.

The actual volatility is 1.52% (24.1% annualised) and the TGARCH plot is evidently displaying an upward sloping curve which seems suggesting that an ulterior augment in the oscillation rate should be expected over the next trading days. Obviously, last Friday’s market drop considerably influenced the fluctuations rate but it is worth pointing out that the mean reverting speed started to decrease well before Friday. Should the market keep plummeting we could see readings around the 2.5% (39.6% in annual terms) by Friday again.

The HyperVolatility team is bearish E-Mini S&P500 futures because the expected increase in the conditional variance is going to drag the price action back down into the 1,110 area by Friday.

It is worth pointing out that the situation could completely change should Obama or Bernanke announce a new fiscal/monetary stimulus package because many investors who got burnt after the August sell-off would probably get back to buy equities or increase their exposure to risky markets.

VIX Index Volatility Forecast (06/09/2011)

The VIX Index opened at 32.2 on Monday, rose to 32.8 on Tuesday, dropped to 31.6 on Wednesday, touched 31.8 on Thursday and closed at 33.9 on Friday.

The current volatility is around 8% (27.7% monthly) and the TGARCH plot is still showing a downward sloping curve which is still trying to complete its mean reverting process and settle around the 4% threshold (13.8% monthly). However, like for the VXN Index, the speed at which the curve was collapsing decreased significantly meaning that the selling pressure that hit the market on Friday had a significant impact on the implied volatility and consequently on the volatility of volatility.

The HyperVolatility team is bullish the VIX Index because its mean reverting speed diminished drastically and a short term burst of the conditional variance is expected to occur within this week.

Should the panic prevail once again we would, almost certainly, see the S&P500 implied volatility index to retest the 40% – 41% although Thursday’s speech will prove decisive in the medium term.

E-Mini Nasdaq Futures Volatility Forecast (06/09/2011)

E-Mini Nasdaq futures opened at 2,220 on Monday, touched 2,226 on Tuesday, rose to 2,246 on Wednesday, plummeted to 2,218 on Thursday and closed at 2,165 on Friday.

The actual volatility is 1.5% (23.8% annualised) and the TGARCH plot is now displaying a slightly upward sloping curve which should keep its upward trend over the next trading hours. The conditional variance, having found support around the 1.5% threshold, seems now ready to bounce back up again and eventually retest the 2% level (31.7% in annual terms) by Friday.

The HyperVolatility team is bearish E-Mini Nasdaq futures because a further increase in the conditional variance is quite likely to occur over the next trading hours.

The price action is likely to retest the 2,100 level by Friday and the fact that the VXN Index will experience an upward moves make this forecast even more reliable.

Maximum attention will be needed on Thursday because, as previously mentioned, Obama’s speech can radically change the overall market sentiment in a matter of a few hours.

VXN Index Volatility Forecast (06/09/2011)

The VXN Index opened at 32.1 on Monday, settled at 32 on Tuesday, dropped to 31.3 on Wednesday and remained at the same level even on Thursday but on Friday it closed at 33.

The actual volatility is around 7.9% – 8% (27.3% – 27.7% monthly) and the TGARCH plot is displaying a curve which is downward sloping and right in the middle of a mean reverting process. However, the speed at which the conditional variance tend to collapse towards its long term equilibrium point has substantially diminished because, particularly during the final stage of the above mentioned movement, the volatility tend to fall down much more quickly than it is and therefore this phenomenon should be interpreted as a warning signal.

The big and violent spike the volatility experienced on Friday (from 31% to 33%) is a great indicator for investors ‘nervousness. The volatility usually rises or declines gently but these unexpected and sharp jumps are clearly indicating that the situation is not looking good.

The HyperVolatility team is bullish the VXN Index because the decreased mean reverting speed and high fear will probably push the index towards the 35% by Friday.

On the other hand, the volatility could decrease and retest the 30% level if Obama is going to announce big changes in the fiscal policy measures.

DJ EuroStoxx50 Futures Volatility Forecast (06/09/2011)

DJ EuroStoxx50 futures opened at 2,258 on Monday, dropped to 2,245 on Tuesday, rose to 2,302 on Wednesday, plummeted to 2,276 on Thursday and closed at 2,205 on Friday.

The actual volatility is around 3.4% (53.9% in annual terms) and the TGARCH plot is displaying a curve which is trading sideways but that is fully back to the warning levels that have been achieved during the heavy sell-off that hit equity markets a few weeks ago. Also, it is worth noting that the mean reverting tendency of the volatility has been completely overwhelmed by a significant selling pressure which maintained the oscillation rate around readings that are historically very high.

The fact that the volatility is moving laterally, although extremely high, means that fear and uncertainty are still the predominant feelings amongst market participants and therefore the oscillation rate is likely to remain at this level even in the upcoming hours.

The HyperVolatility team is bearish DJ EuroStoxx50 futures because the conditional variance should increment over the next trading hours dragging futures prices back down in the 2,110 – 2,120 area by Friday.

German Bund Futures Volatility Forecast (06/09/2011)

German Bund futures opened at 134.3 on Monday, jumped to 135.1 on Tuesday, retested the 134.4 level on Wednesday, achieved 135.5 on Thursday and closed at 136.8 on Friday.

The current volatility is 0.6% (9.5% in annual terms) and the TGARCH chart is displaying a curve which is now insistently upward sloping implying that the buying pressure is far from being over and likely to continue over the next trading hours. Should the situation worsen it would not be surprising to see the volatility retest the 1% level (15.8% annualised) by Friday.

The fragile situation of the global economy and the decreased rate of growth of the American market are factors which are heavily affecting investors’ feelings. Furthermore, the uncertainty about Obama ‘s speech is going to act as a catalyst meaning that a lot of traders will buy German Bund futures to limit market risk.

The HyperVolatility team is bullish this market because the increase in volatility will accompany a  higher buying pressure which will eventually bring the price action to test new all-time highs around the 138.5 – 139 threshold.

Once again, Obama’s speech on Thursday will have a significant impact on this market should any monetary/fiscal stimulus package be announced.

E-Mini Crude Oil Futures Volatility Forecast (06/09/2011)

E-Mini Crude Oil futures opened at 87.5 on Monday, touched 88.8 on Tuesday, settled at 88.9 on Wednesday, dropped to 88.7 on Thursday and closed at 86.7 on Friday.

The actual volatility is 1.8% (28.5% annualised) and the TGARCH plot is showing a curve which is clearly upward sloping and that it seems to signal an ulterior increase in the oscillation rate over the next trading hours. The 1.5% – 1.55% area (23.8% – 24.5% in annual terms) is acting as a support for the conditional variance which inevitably bounce back up all the time the aforementioned threshold get retested.

The fluctuations of E-Mini Crude Oil futures are strongly linked to macroeconomics announcements rather than “micro-exogenous variables” such as demand/supply, inventories, etc and therefore an increase in volatility has to be interpreted as a warning signal.

The HyperVolatility team is bearish E-Mini Crude Oil futures because a spike in the oscillation rate should be accompanied by an ulterior drop in futures prices which are likely to retest the 83 level by Friday.

However, Obama’s speech on Thursday can change the scenario in the case some new fiscal policy measures are going to be announced.

Euro Futures Volatility Forecast (06/09/2011)

Euro futures opened at 1.4504 on Monday, plunged to 1.4439 on Tuesday, settled at 1.437 on Wednesday, plummeted to 1.4267 on Thursday and closed at 1.4193 on Friday.

The actual volatility is 0.73% (11.5% in annual terms) and chart is evidently showing an aggressively upward sloping volatility curve which seems to suggest that a higher degree of market fluctuations should be expected in the upcoming hours. Unlike British Pound futures the plunge in Euro futures prices has been accompanied by a large selling pressure which inevitably lifted the conditional variance.

The concerns about the diminished growth in Europe in addition to the problems connected to the sovereign debt crises are going to augment the selling pressure in the short term.

The HyperVolatility team is bearish Euro futures because the conditional variance should rise in the short term whilst the price action is likely to retest the 1.3900 – 1.4000 area by Friday.

Swiss Franc Futures Volatility Forecast (06/09/2011)

Swiss Franc futures opened at 122.5 on Monday, plunged to 121.9 on Tuesday, rose to 124.1 on Wednesday, achieved 125.8 on Thursday and closed at 126.7 on Friday.

The actual volatility is around 1.3% (20.6% in annual terms) and the TGARCH plot is manifestly showing an upward sloping curve which seems to suggest that the buying pressure has not calmed down yet and therefore likely to continue over the next trading days. The conditional variance is still trading in a very high range and an ulterior increase in could potentially push the curve towards the 1.8% threshold (28.5% annualised) which have been touched a few weeks ago.

Many investors are still buying the Swiss Franc in order to diversify their portfolios and limit their risk. The volatility,during market turmoils, tend to move symmetrically to prices and consequently an ulterior burst in the conditional variance should be interpreted as a long signal.

The HyperVolatility team is bullish Swiss Franc futures because the buying pressure should augment over the next hours and possibly bring the price action towards the 130 – 131 level again.

However, the Swiss Bank is trying to depreciate its currency once again by selling Swiss Francs in the secondary market and extra care should be taken when trading this market.

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