DJ EuroStoxx50 Futures Volatility Forecast (13/11/2010)

The DJ EuroStoxx50 Futures market is obviously in a down trend even if this did not really surprise HyperVolatility’s readers.

However, we do not think this adjustment is  just a short-term retracement and therefore we should be prepared to see prices retesting the 2600 area because despite the drop experienced by this market the last week the volatility remained stable around 0.9% – 1% (15% – 16% annualised).

We are waiting for the big movement to come and reinforcing short positions at the moment could be an aggressive but profitable strategy to adopt. The staff of HyperVolatility is still bearish because the volatility is likely to rise to 1,6% (25% annualised) in the short -medium term  bringing down the price towards the above mentioned 2500 area.

DJ EuroStoxx50 Futures Volatility Forecast (07/11/2010)

The volatility was about to increase because it went from 0.6% to 1% and indeed the DJ EuroStoxx Futures dropped a few points. However, the very last part of the TGARCH volatility plot shows the impact that the QE2 programme had on the market.

The volatility decreased sharply in a matter of a few days and the chart is now displaying a downward sloping curve but the question that all investors are asking themselves is: WHAT IS GOING TO HAPPEN ONCE THE QE2 EFFECT WILL BE OVER?

Almost all the equity markets are showing prices that are not really justified by solid fundamentals and the DJ EuroStoxx is not an exception.

We remain bearish and the market is likely retrace soon. Also, we think that without  the Fed intervention we would be probably talking about the beginning of a new bear market.

DJ EuroStoxx50 Futures Volatility Forecast (31/10/2010)

The DJ EuroStoxx50 Futures Index experienced a weak down move lately and this is clearly reflected by the shy augment in volatility at the very end of the chart.

Having said that, we remain sceptic about a further rally of the Index unless better than expected news hit the market.

The volatility seems to have reached the bottom and, statistically speaking, it is more probable a volatility explosion rather than an ulterior drop because that would imply an estimation of the conditional standard deviation close to zero.

The staff of HyperVolatility is looking for short opportunities and believe that the next week will show a downward movement of the market with the TGARCH volatility rising to 1.5% – 1.8% . The last week forecast were quite accurate since the DJ EuroStoxx50 dropped as we expected but we believe that the short season has just commenced and therefore we advise not to buy additional lots.

DJ EuroStoxx50 Futures Volatility Forecast (24/10/2010)

The European Index reached 2870 in the last week even if some early signs of retracement started to become more evident. The TGARCH volatility keeps decreasing week by week and now it is below 1%. Like for the Bund Futures the questions that many traders and investors are asking us are:

1) How low can volatility get?

2)When enough is enough?

3)Is there a bottom?

We still advise investors to watch their long positions!!! Bank your profits now and wait for the market to take a clear and defined direction. Usually, such a steep downtrend in volatility is a warning signal. In other words, the calm before the storm!!!

The staff of HyperVolatility is not waiting for a double dip however, given the immediate and fast rate of decrease in volatility, a downward retracement should be expected.

DJ EuroStoxx50 Futures Volatility Forecast (17/10/2010)

This week the DJ EuroStoxx50 Futures experienced an upward movement which brought the Index to 2800. This is the highest price since the beginning of the 2010 and it seems the market wants to test this level once again (the first time the market achieved this level was at the beginning of August).

The TGARCH volatility keeps showing an extreme downtrend. This week the volatility is as low as 0.8%. At the end of the chart there seems to be a weak attempt to correct the trend but the macro economic data released this week will reveal the real trend.

The staff of HyperVolatility remains quite sceptical about the effective strenght of the current rally. Volatility is a mean-reverting instrument, hence, either a double dip or a downward correction should be expected.

DJ EuroStoxx50 Futures Volatility Forecast (12/10/2010)

The DJ EuroStoxx50 Futures Index is a very good proxy for analysing European’s financial situation.  Clearly, the TGARCH volatility constantly decreased in the last 5 months signalling that probably the up movement could soon come to an end.

As stated in many academic researches, stochastic volatility is mean reverting and most of time an increase in volatility is registered  when there is a drop in the market.

Therefore, an augment in volatility would, in this case, bring the market down.   Such a hypothesis seems to be confirmed by the fact that the TGARCH estimations are drammatically low ,in fact, they ranged between 1% and 1.5% over the last 5 months and a further drop appear to be quite far from happening.

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