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E-Mini S&P500 Futures Volatility Forecast (22/11/2010)

The E-Mini S&P500 is on the ragged edge. The recent drops the market experienced are just the tip of the iceberg and we believe that in the long run the price might continue to head south.

The TGARCH volatility is 1.2% (19% annualised) and it is still pretty low if we consider that the average volatility percentage for this market is 21%. The recent news about global economy’s health could easily scare away investors from equity markets and the index would be inevitably driven down towards the 1000 area.

The staff of HyperVolatility advises you not to enter any long positions at the moment and wait for placing shorts. The E-Mini S&P500 might still move sideways before heading south;nevertheless, caution is needed because unexpected news and Fed intervention could again change the rules of the game

E-Mini S&P500 Futures Volatility Forecast (13/11/2010)

The drop of the S&P500 Futures is not really a surprise to us and the retracement we have been talking about in the last 2 weeks is still on its way.

The TGARCH volatility plot shows an upward sloping curve but still with readings around 0.5% (8% annualised)  and therefore it is reasonable to believe that the volatility will keep rising even in the upcoming week touching 1% – 1.2% (15% – 17% annualised).

The E-Mini S&P500 Futures is likely to retest the 1100 area before bouncing back and make new highs.Consequently, keep selling in the short run and calm down your bullish thoughts.

E-Mini S&P500 Futures Volatility Forecast (07/11/2010)

We are not in a bull market.We are not in a bear market.We are in a DOPED MARKET !!!

The volatility plot shows an attempt to bring back the market to fairer prices which has been blocked by the intervention of the Fed that completely changed the situation.

The TGARCH estimation is now back to 0.4%, hence, the staff of HyperVolatility proposes you the same question we asked you for the last 2 weeks : HOW LOW CAN THE VOLATILITY GET ?

We remain bearish because of 4 reasons:

1) Market prices are not justified at all by the current economic conditions

2) The volatility bounced back to an extremely low level and this is probably going to provoke an even more violent explosion

3) Investors are buying because they are naively relying on the constant help of the Fed

4) The Fed cannot continue to pump money in the system without destroying it

We suggest watching out your longs because the first volatility rise was contained by the QE2 announcement but we do not really know if this is going to happen again.

E-Mini S&P500 Futures Volatility Forecast (31/10/2010)

The last week we forecasted an augment in the S&P500 volatility because it touched the bottom and it was improbable that  an ulterior down movement would happen in the market. Well, our forecasts are now reality!!!

The TGARCH volatility plot is now upward sloping and it would not be surprising to see readings about 2% – 2.5%. Even if this market appears really strong under a technical point of view the staff of HyperVolatility again suggests that the current condition is a favourable opportunity to go short.

Therefore, we again advise you to close out your long positions and walk away (if you are risk -averse) but that would be the 2nd best solution because the first answer to such a volatility forecast would be an heavy selling.

Likewise, the question that we ask you is the same one that we proposed the last week: HOW LOW CAN THE VOLATILITY GET ???

E-Mini S&P500 Futures Volatility Forecast (24/10/2010)

The volatility in the E-Mini S&P500 Futures sensibly increased over the last 2 weeks but it remains below the 1% level.

The E-Mini achieved 1180 this week but the spread between the VIX and the S&P500 TGARCH volatility is over 10% and this could be an early sign of a retracement since the higher the spread the higher the probability that the realised volatility will augment.

The chart suggests a further down movement of the volatility and this brings more evidence to our hypothesis: the market will experience a retracement which will not lead to a double dip but to a retracement. Many investors are well aware of the fact that such an upward move cannot keep going for ever and since many positions get closed out before the end of year the likelihood of a down move increases as we approach December. Consequently, the staff of  HyperVolatility recommends to wait for the completion of a retracement before placing new long positions.

E-Mini S&P500 Futures Volatility Forecast (17/10/2010)

The TGARCH volatility even this week showed a very weak upward movement. The chart is particularly interesting since such a drastic and constant decline in conditional standard deviation is not usual.

The E-Mini S&P500 Futures market touched 1700 this week again signalling an apparent strong uptrend, however, in the last 2 weeks it appears that the volatility is increasing in value despite the high levels achieved by the Index.

Nevertheless, the staff of HyperVolatility still believes that a downward correction of the market is imminent and therefore the recent rallies represent an excellent selling opportunity.

The TGARCH volatility should gets back to 12% – 16% in the upcoming 3 weeks driving the market down for several days. Furthermore, the volume figures backing the bullish movement seems not to be comforting and this is another factor which supports our hypothesis. The macro economics data released this week will be very important.

Last but not least,  be careful at the opening of the next Monday. The last Friday the futures on German bunds expired and it is reasonable to believe that hedge fund and money managers will place new positions the next Monday according to their forecasts and consequently an unfilled gap down or a distant gap up would represent strong signals.

E-Mini S&P500 Futures Volatility Forecast (12/10/2010)

The E-Mini S&P500 futures Index has a great inverse correlation with the German Bund.In other words, if the first goes down the 2nd goes up and vice versa. Therefore, if we were talking about an abvious buying opportunity in the Bund futures market, the chart on the left VISIBLY suggests that a selling climax is going to happen in the S&P500.

Watch out, stormy weather is expected !!!!

The TGARCH volatility touched a ridiculously low level at 0.1%  and it is reasonable to believe that the E-Mini S&P500 has reached its top and it is now ready for a retracement which seems to be quite consistent (given the velocity the volatility droppped).

The last part of the chart suggests that the down movement is already on is way and the great uncertainty surrounding the financial recovery helps feeding such theory although classical technical analysis still highlights a bullish trend.

However, time series analysis and stochastic volatility measurements performed on larger samples confirm the fact that the bullish move is running out of steam and bears are getting back into the game.

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