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DJ EuroStoxx50 Futures Volatility Forecast (10/07/2011)

The last week we were bearish DJ EuroStoxx50 futures and our forecast proved accurate and profitable once again. In fact, the market opened at 2,869 dropped to 2,853 on Tuesday, plummeted to 2,841 on Wednesday, recovered to 2,854 on Thursday and settled at 2,797 on Friday. An extremely profitable trade!!!

The volatility is now around 1% (15.8% annualised) but the TGARCH plot is visibly displaying a curve which is downward sloping although the up move is not proportioned at all to the drop we saw the last week. Additionally, the slope of the volatility curve is far from being steep and the very last part of the chart highlights that during the upcoming hours a slow flattening of the oscillation rate could be most probable scenario.

Furthermore, the 2,800 threshold, although was violated, is a fairly strong support level and the fact that the conditional variance is already diminishing is an indicator that the selling pressure is running out of steam.

On the other hand, the bad job news that was released on Friday along with Portugal’s downgrading and Greece’s default proximity are all factors that should be taken into account. Moreover, the shy volatility increase, despite of what happened, could also mean that the big move is yet to come.

The HyperVolatility team is bearish DJ EuroStoxx50 futures because the market should move sideways in the first part of the week and eventually touch the 2,775- 2,780 area by the next Friday.

Nonetheless, should the volatility drop back to 0.7% – 0.8% (11.1% – 12.6% annualised) we would start looking for buy opportunities but in that case our stops will be very tight.

DJ EuroStoxx50 Futures Volatility Forecast (04/07/2011)

The last week we were bullish DJ EuroStoxx50 futures and 2,800 was our profit target for the week. Needless to say, the HyperVolatility team provided our readers with forecasts which turned out even more profitable than we thought in the first place.

In particular, the market opened at 2,731, rose to 2,768 on Tuesday, kept on going up on Wednesday where it touched 2,810 and continued to rally until the end of the week, in fact, 2,856 and 2,888 have been the last closing prices on Thursday and Friday respectively.

The volatility is now at 1.24% (19.6% annualised) whilst the TGARCH plot is now displaying an upward sloping curve, although the slope is not that steep, and therefore it is reasonable to believe that the next trading hours are going to see a more volatile price action.

It is reasonable to believe that the first half of the week will present a slow movement of the price with a sideways movement or eventually a short term break out of the 2,900 points however, in the second half the volatility should manifest itself and bring futures prices back down.

The HyperVolatility is moderately bearish on DJ EuroStoxx50 futures prices because the steady rally has been favoured by the Greece’s decision to vote for the austerity package but the shy augment in variance, despite the up move, should be interpreted as a warning signal. Specifically, we believe that the price will retest the 2,700 – 2,750 area by Friday but the down move should be neither extreme nor fast but rather slow and constant.

DJ EuroStoxx50 Futures Volatility Forecast (27/06/2011)

The last week we were bullish DJ EuroStoxx50 futures and the fact that the market opened at 2,754 and immediately rallied to 2,810 on Tuesday, even if it plunged over the rest of the week, is the proof that our initial analysis was correct but the bad macroeconomics news which hit the market, completely changed the scenario. In fact, futures prices sharply plummeted to 2,786 on Wednesday touched 2,758 on Thursday and settled at 2,716 on Friday.

The volatility is now 1.1% (17.4% annualised) and the TGARCH plot is displaying an upward sloping curve which seems to suggest that an increase in the conditional variance should be expected over the next trading days.

On the other hand, it seems that the catalyst which caused the price drop, that is global news, is not going to influence the price action for a prolonged period of time and that is why it is reasonable to believe that the volatility will increase in the first half of the week but it will then drop and mean revert towards the 0.8% level (12.6% annualised).

The HyperVolatility team remains moderately bullish on DJ EuroStoxx50 futures because the decrease of market volatility should back the price action and favour a recovery of futures which should retest the 2,800 resistance by Friday.

Nevertheless, we will probably enter the market in the second half of the week because the short term explosion of market variance should continue over the next 2 days before starting to mean revert.

DJ EuroStoxx50 Futures Volatility Forecast (21/06/2011)

The last week we were waiting for the DJ EuroStoxx50 futures to retest the 2,780 level and effectively so it was. Futures prices opened at 2,726, tried to break through 2,780 on Tuesday but bears pushed the price back to 2,714 on Wednesday, however, both Thursday and Friday saw a fairly good recovery of the price because 2,719 and 2,770 have been the respective closing prices.

The volatility is now at 1.6% (25.3% in annual terms) and the TGARCH plot is now showing a downward sloping curve which is going to end its mean reverting process once the 1% level (15.8% annualised) will be touched.

The decreasing conditional variance should favour a recovery of the price, despite of the bad news regarding the Euroland, which should rise constantly over the next trading hours.

Also, the augment in price could be even characterised by violent movements because during the mean reverting process the variance tend to move quite slowly at the beginning but very quickly towards the end and therefore some big buying pressure should be expected during the next hours.

The HyperVolatility team is bullish DJ EuroStoxx50 futures because we believe that the price should reach 2,850 by Friday, volatility permitting.

DJ EuroStoxx50 Futures Volatility Forecast (13/06/2011)

The last week we were bearish the DJ EuroStoxx50 and we proposed the 2,730 area as a good profit target for a potential short position; our analysis were very good once again. In fact, the Index opened at 2,741 (2,784 was the closing price 2 weeks ago) it dropped to 2,738 on Wednesday and, although it rallied to 2,782 on Thursday, DJ EuroStoxx50 futures closed at 2,730 on Friday.

The current volatility is 1.8% (28.5% annualised) and the TGARCH plot is displaying an evidently downward sloping curve which is probably going to touch 0.85% – 0.9% (13.4% – 14.2% in annual terms) before the end of the week.

The diminishing oscillation rate is a pretty strong signal that the down move is over and that the market is ready to go up again even if the recovery should not be as strong as someone might think.

Specifically, the conditional variance curve already dropped significantly, although the market plummeted during the last day of the previous week, meaning that some investors kept their long positions on and therefore we expect the up move not to be violent but constant and slow.

The HyperVolatility team is moderately bullish on DJ EuroStoxx50 futures because the decrease in market fluctuations is going to push the price higher although we reckon that a sideways movement could easily dominate the week.

However, the Index should retest the 2,780 – 2,790 area by Friday and we will wait for the volatility to provide us with a statistically reliable entry point before entering the market.

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

We were bullish the European market but our forecast proved correct solely in the first half of the week because over the second half the market retraced and moved sideways. In fact, futures prices opened at 2,811 rose to 2,872 but then plummeted to 2,795 on Thursday and then closed at 2,784 on Friday.

The current volatility is 1.4% (22.2% annualised) and the TGARCH plot is evidently displaying a downward sloping curve which is probably going to collapse even further over the next trading days in order to complete the mean reverting process.

Furthermore, the conditional variance, which symmetrically increased on Monday and Tuesday along with the price action, is now trying to revert towards its equilibrium point which is stable around the 0.9% area (14.2% in annual terms).

However, the interpretation is quite difficult in this case: is the drop in the conditional variance due to the sideways movement or to investor’s will to push the Index back up again? We believe the first hypothesis is the most reliable one.

The HyperVolatility team is bearish the DJ EuroStox50 futures because the conditional variance should collapse during the next trading days, accompanying an ulterior lateral movement of the price, but should augment in the second half dragging the market down into the 2,735 – 2,740 area by the next Friday.

However, should the market rise we won’t enter any positions and we will wait for the price action to stabilise because at the moment the large amount of macroeconomics data and the transitory period the economy going through are spreading a lot of irrationality amongst participants: the market is always right but that does not imply we have to agree all the time.

DJ EuroStoxx50 Futures Volatility Forecast (29/05/2011)

The last week we were expecting a drop of the Index in the 2,805 – 2,810 area and effectively so it was. In fact, the market opened at 2,787 moved higher and touched 2,809 on Wednesday, it rallied to 2,818 on Thursday but 2,808 was the settlement price registered on Friday.

The volatility is around 0.98% – 1% (15.5% – 15.8% annualised) and the TGARCH plot is evidently displaying a curve which is trying to complete a mean reverting process whose run is going to end once the 0.8% support (12.6% in annual terms) is touched.

The drop in volatility and the initial doubtful movement of DJ EuroStoxx50 futures pushed many investors away from the European equity market (obligating them to invest in safer markets such as the Swiss Franc or Bund futures) but the upcoming week should bring some fresh and renewed buying pressure.

The volatility is probably going to decrease over the next trading hours and the plunge of the oscillation rate is likely to maintain the Index in the actual area and eventually to push it even higher.

The HyperVolatility team is bullish DJ EuroStoxx50 futures and we will try to place some long positions as soon as the market is going to open. However, should the volatility increase and surpass the 0.95% level (15% annualised) we will step aside and monitor the price action waiting for the next opportunity.

DJ EuroStoxx50 Futures Volatility Forecast (23/05/2011)

The HyperVolatility team was right once again. The last week we forecasted a bearish movement of the Index but we also anticipated a strong sideways move of the price action and effectively so it was. Specifically, the market opened at 2,844 rallied to 2,860 and the dropped back to 2,834 on Friday.

The volatility is now at 0.98% (15.5% annualised) and the plot is evidently displaying a quite stable situation where the conditional variance is constantly decreasing and just achieved its equilibrium point.

DJ EuroStoxx50 futures clearly failed to break through the 2,880 resistance point which proved to be quite solid and many bears took advantage of bulls’ indecision to drag back the price in a more “comfortable” area.

Additionally, the volatility is still very low and the probability of a short term retracement could be quite high even during the next hours and consequently a great deal of attention will be needed in order to profit from such uncertain markets.

The HyperVolatility team remains bearish on DJ EuroStoxx50 futures because we think that the down move did not start yet and the conditional variance will tend to spike up over the next trading days and eventually touch the 1% – 1.05% threshold (15.8% – 16.6% in annual terms).

Consequently, futures prices should plummet and probably retest the 2,805 – 2,810 area but another lateral movement of the price, at least in the initial part of the week, is quite probable to occur.

Once again, we will wait for the volatility to augment before entering the market and should the conditional variance remains stable we would not place any trade at all.

DJ EuroStoxx50 Futures Volatility Forecast (15/05/2011)

The European Index has been inevitably pushed down by commodity prices (and particularly oil) because both asset classes have a fairly robust positive correlation. The DJ EuroStoxx50 futures opened at 2,877 dropped to 2,895 and then collapsed to 2,857 the last Friday.

The volatility is now around 0.98% – 1% (15.5% – 15.8% in annual terms) but despite the bearish week the TGARCH plot looks extremely stable and, at the right hand part of the chart, it is evident that the volatility curve is even downward sloping.

Clearly, the DJ EuroStoxx50 is not a market which presents positive correlation between price and volatility and therefore such symmetry should be interpreted as a warning signal. The drop we saw the last week should now welcome an initial sideways movement which should be then followed by a further plunge of futures prices whilst the volatility is likely to increment and achieve readings around the 1.1% area (17.4% annualised).

The HyperVolatility team is moderately bearish on DJ EuroStoxx50 futures because we believe the down movement is going to continue over the next week even if the chances of a sideways play of the price action, particularly in the first half of the week, are fairly high. Consequently, we will wait for the volatility to give us the entry point but by the end of the week the price should retest the 2,815 – 2,825 area.

Nevertheless, should the sideways movement remain the predominant “feature” of the upcoming days we would not enter the market at all.

DJ EuroStoxx50 Futures Volatility Forecast (10/05/2011)

The HyperVolatility team was right once again. The plunge we forecasted the last week fully manifested itself and the surge in volatility we were expecting is clearly visible in the right hand part of the chart.

DJ EuroStoxx50 futures opened at 2,943 dropped to 2,901 on Wednesday and closed at 2,882 on Friday whilst our profit target was set to 2,915 – 2,920. A great trade indeed!!!

The actual volatility is around 1.2% (19% annualised) but the curve does not appear to be aggressively upward sloping and the logical consequence of such a phenomenon is that the down move is now over: the DJ EuroStoxx50 futures will head north again.

The volatility curve will probably mean revert and collapse to 0.85% (13.4% annualised) which is its equilibrium point whilst futures prices should rise and retest the 2,940 area once again even if at this level a bit of a sideways play could occur before a potential definite break out of the resistance point.

The HyperVolatility team is bullish on DJ EuroStoxx50 futures and we will place some longs as soon as possible because the conditional variance is probably going to collapse backing an ulterior recovery of the price. Nevertheless, we will carefully monitor the 2,940 zone because many bears will place their entries at this threshold.

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