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HyperVolatility – End of the Year Report 2014

The HyperVolatility End of the Year Report 2014 is finally ready and this year we have added more asset classes.

You can browse the report using the interactive Table of Contents which allows you to jump straight to the analysis you want to read.

The HyperVolatility End of the Year Report 2014 can be downloaded FOR FREE at the following link (no registration required):

HyperVolatility End of the Year Report 2014

HyperVolatility End of the Year Report 2014 (PRINT)

The 1st part examines the performances of the following asset classes throughout the 2014:

Equity Indices: Mini S&P500, DAX 30

Treasury Bonds: German Bund, US 10–year Treasury Bonds

Currencies: Euro, Japanese Yen, British Pound Sterling

Commodities: WTI Crude, Brent Crude, Gold

Volatility Indices: VIX Index

The 2nd part analyzes the macroeconomic scenario in USA, Europe, Australia, Japan and BRICS economies (Brazil, Russia, India, China and South Africa). The economic indicators that have been considered for the study are the following:

GDP Growth Rate

Unemployment Rate

Inflation Rate

Debt–to–GDP Ratio

Credit Rating

Please, email all your questions at info@hypervolatility.com

Euro Futures Volatility Forecast (05/10/2011)

Euro futures opened at 1.3509 on Monday, achieved 1.358 on Tuesday, dropped to 1.3552 on Wednesday, retested the 1.3576 area on Thursday and plunged to 1.3388 on Friday.

The current volatility is 0.76% (12% annualised) and the TGARCH plot is evidently displaying a fairly stable curve which should probably remain around this level in the upcoming hours.

The great uncertainty surrounding the Euro zone could keep the selling pressure pretty high but the fact that the fluctuations rate is still trading in a fairly “normal” range seems suggesting that the short term trend could change.

Clearly, most of the movements will be influenced by what politicians are going to say/do in order to ring fence a potential Greek sovereign debt default  implying that a great deal of attention to public speeches will be needed.

The HyperVolatility team is moderately bullish Euro futures because the stable outlook of the volatility curve should support the price action which could eventually retest the 1. 3500 area by Friday.

Swiss Franc Futures Volatility Forecast (05/10/2011)

Swiss Franc futures opened at 111.06 on Monday, touched 111.64 on Tuesday, settled to 111.48 on Wednesday, remained around 111.55 on Thursday and sharply dropped to 110.47 on Friday.

The actual volatility is 0.74% (11.7% in annaul terms) and the TGARCH plot is now showing an extremely flat curve which would probably remain around this level over the next trading days. However, the great steadiness of the curve and the extended bear movement of the volatility could easily lead to short term bursts of the fluctuations rate and consequently to an augment of the buying pressure.

The HyperVolatility team is moderately bullish Swiss Franc futures because it is likely that the oscillation rate will augment over the next trading hours pushing the price action towards the 111.8 – 112 area before Friday.

Nonetheless, extra care should be taken when trading this market because the Swiss authorities are closely monitoring the exchange rate in order to prevent an ulterior sharp appreciation from happening.

British Pound Futures Volatility Forecast (05/10/2011)

British Pound futures opened at 155.4 on Monday, jumped to 156.3 on Tuesday, retraced to 155.8 on Wednesday, settled at 156 on Thursday and closed at 155.7 on Friday.

The actual volatility is 0.53% (8.4% annualised) and the TGARCH plot is showing an upward sloping curve which is trying to complete its mean reverting process towards the long term equilibrium point which is stable around the 0.55% level (8.7% in annual terms).

However, the spread between the current level and the balance threshold is not that striking and consequently there should not be violent moves to be expected over the next trading hours.

The HyperVolatility is slightly bearish British Pound futures because the increase in the conditional variance should push the price action toward the 152.8 – 153 level before Friday.

Nevertheless, further bad macroeconomics news could easily drag futures prices even more down because investors would rush to buy US dollars whose value would irremediably appreciate against all other European countries. Should the last scenario occurs we would see British Pound futures retest the 150 support.

Japanese Yen Futures Volatility Forecast (05/10/2011)

Japanese Yen opened at 130.9 on Monday, touched 130.1 on Tuesday, achieved 130.8 on Wednesday, plunged to 130.3 on Thursday and settled at 129.7 on Friday.

The actual volatility is 0.53% (8.4% annualised) and the TGARCH plot is now displaying a fairly stable volatility curve which is likely to remain at this level even in the upcoming trading days.

However, a short term burst of the conditional variance could very easily occur and that would imply an increase in the buying pressure which would probably push higher the price action.

The HyperVolatility team is neither bullish nor bearish Japanese Yen futures because the volatility should remain at current levels even though some oscillations are highly probable.

The price action should remain around the 130.6 -130.8 level throughout the entire week but a worst than expected news could easily change the scenario and push Japanese Yen futures towards the 131 threshold.

Euro Futures Volatility Forecast (27/09/2011)

Euro Futures opened at 1.36 on Monday, remained unchanged on Tuesday, plummeted to 1.35 on Wednesday, plunged to 1.346 on Thursday and closed at 1.35 on Friday.

The volatility is now 0.8% (12.6% annualised) and the TGARCH curve is neither upward nor downward sloping even if the very last part of the plot seems suggesting a shy increase in the conditional variance. However, the fluctuations rate is now very far from its medium term equilibrium point which ranges between the 0.73% – 0.77% area (11.5% – 12.2% in annual terms).

The first half of the week could see the Single currency to depreciate against the US dollar because the oscillation rate is still looking at the northern part of the chart but it is likely that the rumours about the 2 -3 trillion euro package to save Europe from financial catastrophe will provoke some speculative buying.

European leaders are now calling for a more concrete action to bail out Greece (later is better than never) and to prevent the crises from spreading to too-large-to-be-saved countries (read Italy and Spain): we will see if facts will follow words because the latter are cheap but the former are not!!!

The HyperVolatility team is moderately bullish Euro futures, even if the first half of the week could see another downside move, and the conditional variance should soft over the next trading hours whilst the price action should eventually retest the 1.3600 – 1.3700 area by Friday.

Needless to say that an ulterior macroeconomics shocks would irremediably drag futures prices down as more and more investors will rush to buy US dollars.

 

Swiss Franc Futures Volatility Forecast (27/09/2011)

Swiss Franc futures opened at 112.8 on Monday and remained stable at this level on Tuesday but on Wednesday the price hit 111.4 whilst it plummeted to 110.4 on Thursday and settled at 110.7 on Friday.

The actual volatility is 1% (15.8% in annual terms) and the TGARCH curve is still showing a persistent lateral movement which is probably going to last in the upcoming days because the heavy intervention of the Swiss Central bank  scared away many investors who were,instead, seeking protection.

Swiss Franc futures is now an almost dead market. The intervention of the Swiss monetary authorities poised the price action and the massive drop in volatility is simply the natural consequence of the aforementioned equilibrium distortion.

The HyperVolatility team is slightly bullish Swiss Franc futures because the low volatility environment should support the price action which could potentially retest the 112 -113 threshold by Friday. However, any large move on the upside will be heavily arbitraged away from the Swiss Bank giving a great arbitrage opportunity to traders who will look to short Swiss Franc futures should they move too further away.

Overall, the week should see a large lateral movement of the price action with very short term movements,potentially  on the upside, that are not going to distort the price action that much.

British Pound Futures Volatility Forecast (27/09/2011)

British Pound Futures opened at 156.6 on Monday and settled at the same price on Tuesday, dropped to 154.9 on Wednesday, touched 153.4 on Thursday and settled at 154.7 on Friday.

The current volatility is 0.57% (9% in annual terms) and the volatility curve is evidently displaying an upward sloping trend which is a natural consequence of the large plunge the price action experienced over the last week. On the other hand, the conditional variance has now touched its 5 months high and an ulterior explosion of the fluctuations rate should be considered very carefully.

The large retracement in the market was caused by a sharp appreciation of the dollar which has been, in turn, provoked by the sell-off that hit financials the last week.

The HyperVolatility team is moderately bullish British Pound futures because the conditional variance will probably tend to soften over the next trading days supporting the price action which is likely to retest the 156 – 157 area by Friday.

Needless to say that the US dollar remains one of the few safe havens left and therefore a worsening of the European sovereign debt crises would push more and more traders to long the greenbacks and short Her Majesty’s currency: another delicate week ahead!!

Japanese Yen Futures Volatility Forecast (27/09/2011)

Japanese Yen Futures opened at 130.4 on Monday and remained at the same level on Tuesday, moved to 130.5 on Wednesday, rose to 131.2 on Thursday and closed at 130.4 on Friday.

The actual volatility is 0.45% (7.1% annualised) and the TGARCH curve is clearly moving sideways. It would appear that market participants do not expect wild fluctuations in the price action, at least in the short term, although the fact that the conditional variance did not increase despite the consistent drop occurred on Friday is a bit of a warning signal.

Japanese yen futures decreased sharply on Friday even if the equity markets saw an heavy sell-off because the intervention of the central bank of Japan scared away many investors that are now looking for protection elsewhere.

The HyperVolatility team is neither bearish nor bullish. We think that there could be a very short term explosion of the volatility in the first 2 days of the week but the overall picture should remain almost unchanged with futures prices probably settling around the 130 – 130.5 area by Friday.

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.

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