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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.

E-Mini S&P500 Futures Volatility Forecast (27/09/2011)

E-Mini S&P500 futures opened at 1,197 on Monday, touched 1,195 on Tuesday, dropped to 1,156 on Wednesday, plunged to 1,124 on Thursday and closed at 1,130 on Friday.

The actual volatility is 2% (31.7% annualised) and the TGARCH plot is manifestly showing an upward sloping curve which is just the natural consequence of the sharp drop futures prices experienced the last week. However, the curve is not extremely steep, although pretty high, implying that the upside potential of the conditional variance could be limited.

The European sovereign debt crises is still the main issue causing sleepless nights to investors and traders but the intention expressed by EU policymakers to bail out European banks, extend the peripheral bond buying programme and increase the EFSF will probably cool down investors’ nervousness.

The HyperVolatility team is bullish E-Mini S&P500 futures because the volatility should keep mean reverting over the next trading hours whilst the price action is likely to retest the 1,250 – 1,260 area by Friday.

VIX Index Volatility Forecast (27/09/2011)

The VIX index opened at 32.7 on Monday, rose to 32.8 on Tuesday, jumped to 37.3 on Wednesday, achieved 41.3 on Thursday in a very volatile session and closed to 41.2 on Friday.

The actual volatility is 8% (27.7% monthly) and the TGARCH plot is showing an upward sloping curve which, in the very last part, does present some signs of retracement that, however, should be carefully interpreted given the delicate financial situation we are in.

The massive sell-off we saw the last week provoked an augment in volatility of volatility but the spike was not proportioned to the violence of the underlying movements. The VIX closed for 2 consecutive days above the 41% level and even during the big market drop occurred in May 2010 the aforementioned point was only barely touched implying that the probability for a mean reverting movement are now very much increased.

The HyperVolatility team is bearish the VIX index because the very last part of the chart should be considered as a short term explosion which is not going to affect VIX fluctuation over the medium term. Consequently, we could see the S&P500 implied volatility index to retrace and eventually close around the 30% level before Friday.

 

E-Mini Nasdaq Futures Volatility Forecast (27/09/2011)

E-Mini Nasdaq futures opened at 2,300 on Monday, closed at 2,296 on Tuesday, dropped to 2,246 on Wednesday, plunged to 2,179 on Thursday and settled to 2,203 on Friday.

The current volatility is 1.9% (30.1% annualised) and the TGARCH chart is evidently displaying an upward sloping curve which seems to suggest an increase in the conditional variance over the next trading days. Nevertheless, the sharp explosion of the oscillation rate has now touched a critical level which has been violated only once in the last 5 months.

The probability of the volatility to keep rising is fairly low unless another sell-off day is going to occur in the next days. As mentioned in previous analysis most of the attention will be focused on speculative buying in the hope the European Union will manage to respond firmly to market concerns.

The HyperVolatility team is moderately bullish E-Mini Nasdaq futures which are likely to retest the 2,300 – 2,350 threshold before Friday whilst the oscillation rate should soften and bring some relief to investors.

DJ EuroStoxx50 Futures Volatility Forecast (27/09/2011)

DJ EuroStoxx50 futures opened at 2,100 on Monday, touched 2,105 on Tuesday, dropped to 2,048 on Wednesday, plunged to 1,986 on Thursday but settled to 2,020 on Friday.

The current volatility is 2.6% (41.2% annualised) and the TGARCH curve is evidently showing an upward sloping curve which seems suggesting that an ulterior augment in the oscillation rate should be expected in the upcoming trading days. However, the 3% volatility level (47.6% in annual terms) proved to be a solid support in the previous week and only a breakthrough of this threshold would provoke a further explosion which would push the oscillation rate towards the 4% again (63.4% in annual terms).

The concerns about the stability of peripheral European countries hit heavily all markets and the DJ EuroStoxx50 is clearly not an exception to the rule. Most of the attention will be concentrated on the 2-3 trillion parachute that EU policy makers are thinking of implementing and this could add many speculative bidders to the crowd.

The HyperVolatility team is moderately bullish this market because the high volatility levels should soften and head south before Friday although some short term explosions are still probably. Consequently, we are expecting the price to retest the 2,150 – 2,180 area by Friday because the diminishing rate of market fluctuations should allow the price action to regain terrain.

German Bund Futures Volatility Forecast (27/09/2011)

German Bund futures opened at 137.5 on Monday, moved to 137.7 on Tuesday, closed to 137.9 on Wednesday, jumped to 138.7 on Thursday and settled to 137.6 on Friday.

The actual volatility is 0.57% (9% in annual terms) but the TGARCH curve is now slightly upward sloping even though we still remain in a fairly low level and very close to the long term equilibrium point. It is worth noting that this time the increase in the conditional variance has not been caused by an augment in the buying pressure but from a sharp decline in futures prices.

The fact that the symmetric effect between price and volatility is now over means that the volatility will probably tend to augment over the next trading days and accompany an ulterior drop of German Bund futures.

The announcement of the 2-3 trillion euro package and the consequent increase of the EFSF are likely to attract speculative sellers because most of the investors will switch their attention back on risky assets.

The HyperVolatility team is moderately bearish German Bund futures because the conditional variance is likely to head north over the next trading days whilst the price should retest the 134.5 – 135 area by Friday.

On the other hand, this market is one of the last safe havens remained and any bad macroeconomics news would provoke a massive buying pressure which would lift the price to 138.5

E-Mini Crude Oil Futures Volatility Forecast (27/09/2011)

E-Mini Crude Oil futures opened at 85.6 on Monday and remained around this level on Tuesday as well but on Wednesday the price action plunged to 84.6 whilst on Thursday a $4 dollar drop dragged futures prices to 80.2 and the week closed at 80.1 on Friday.

The actual volatility is 2.6% (41.2% in annual terms) and the TGARCH curve is evidently showing an upward sloping curve which seems to suggest that further volatility should be expected over the next trading hours. On the other hand, the current readings have been reached only 2-3 times over the past 5 months and all the time the curve surpassed this threshold the mean reverting pressure became so intense that the fluctuations rate “had to collapse” towards its medium term equilibrium point; that is 1.7% – 1.8 % (26.9% – 28.5% annualised).

The Crude Oil market is not following fundamentals anymore. The latest news regarding Crude Oil inventories and Cushing showed a massive draw which, in normal trading conditions, would have pushed the price up but clearly over the last week we “went through” the opposite scenario.

The HyperVolatility team is moderately bullish E-Mini Crude Oil futures because the volatility should probably mean revert and support the price action although some short term retracements are quite likely to occur, particularly in the first half of the week.

Futures prices, ceteris paribus, are likely to retest the $ 83 – 84 area but an ulterior macroeconomics shock would depreciate the Euro, appreciate the dollar and depress oil prices.

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