Categories

Archives

German Bund Futures Volatility Forecast (06/09/2011)

German Bund futures opened at 134.3 on Monday, jumped to 135.1 on Tuesday, retested the 134.4 level on Wednesday, achieved 135.5 on Thursday and closed at 136.8 on Friday.

The current volatility is 0.6% (9.5% in annual terms) and the TGARCH chart is displaying a curve which is now insistently upward sloping implying that the buying pressure is far from being over and likely to continue over the next trading hours. Should the situation worsen it would not be surprising to see the volatility retest the 1% level (15.8% annualised) by Friday.

The fragile situation of the global economy and the decreased rate of growth of the American market are factors which are heavily affecting investors’ feelings. Furthermore, the uncertainty about Obama ‘s speech is going to act as a catalyst meaning that a lot of traders will buy German Bund futures to limit market risk.

The HyperVolatility team is bullish this market because the increase in volatility will accompany a  higher buying pressure which will eventually bring the price action to test new all-time highs around the 138.5 – 139 threshold.

Once again, Obama’s speech on Thursday will have a significant impact on this market should any monetary/fiscal stimulus package be announced.

E-Mini Crude Oil Futures Volatility Forecast (06/09/2011)

E-Mini Crude Oil futures opened at 87.5 on Monday, touched 88.8 on Tuesday, settled at 88.9 on Wednesday, dropped to 88.7 on Thursday and closed at 86.7 on Friday.

The actual volatility is 1.8% (28.5% annualised) and the TGARCH plot is showing a curve which is clearly upward sloping and that it seems to signal an ulterior increase in the oscillation rate over the next trading hours. The 1.5% – 1.55% area (23.8% – 24.5% in annual terms) is acting as a support for the conditional variance which inevitably bounce back up all the time the aforementioned threshold get retested.

The fluctuations of E-Mini Crude Oil futures are strongly linked to macroeconomics announcements rather than “micro-exogenous variables” such as demand/supply, inventories, etc and therefore an increase in volatility has to be interpreted as a warning signal.

The HyperVolatility team is bearish E-Mini Crude Oil futures because a spike in the oscillation rate should be accompanied by an ulterior drop in futures prices which are likely to retest the 83 level by Friday.

However, Obama’s speech on Thursday can change the scenario in the case some new fiscal policy measures are going to be announced.

Euro Futures Volatility Forecast (06/09/2011)

Euro futures opened at 1.4504 on Monday, plunged to 1.4439 on Tuesday, settled at 1.437 on Wednesday, plummeted to 1.4267 on Thursday and closed at 1.4193 on Friday.

The actual volatility is 0.73% (11.5% in annual terms) and chart is evidently showing an aggressively upward sloping volatility curve which seems to suggest that a higher degree of market fluctuations should be expected in the upcoming hours. Unlike British Pound futures the plunge in Euro futures prices has been accompanied by a large selling pressure which inevitably lifted the conditional variance.

The concerns about the diminished growth in Europe in addition to the problems connected to the sovereign debt crises are going to augment the selling pressure in the short term.

The HyperVolatility team is bearish Euro futures because the conditional variance should rise in the short term whilst the price action is likely to retest the 1.3900 – 1.4000 area by Friday.

Swiss Franc Futures Volatility Forecast (06/09/2011)

Swiss Franc futures opened at 122.5 on Monday, plunged to 121.9 on Tuesday, rose to 124.1 on Wednesday, achieved 125.8 on Thursday and closed at 126.7 on Friday.

The actual volatility is around 1.3% (20.6% in annual terms) and the TGARCH plot is manifestly showing an upward sloping curve which seems to suggest that the buying pressure has not calmed down yet and therefore likely to continue over the next trading days. The conditional variance is still trading in a very high range and an ulterior increase in could potentially push the curve towards the 1.8% threshold (28.5% annualised) which have been touched a few weeks ago.

Many investors are still buying the Swiss Franc in order to diversify their portfolios and limit their risk. The volatility,during market turmoils, tend to move symmetrically to prices and consequently an ulterior burst in the conditional variance should be interpreted as a long signal.

The HyperVolatility team is bullish Swiss Franc futures because the buying pressure should augment over the next hours and possibly bring the price action towards the 130 – 131 level again.

However, the Swiss Bank is trying to depreciate its currency once again by selling Swiss Francs in the secondary market and extra care should be taken when trading this market.

British Pound Futures Volatility Forecast (06/09/2011)

British Pound futures opened at 164 on Monday, plummeted to 162.8 on Tuesday, plunged to 162.4 on Wednesday, settled at 161.8 on Thursday and closed at 162.1 on Friday.

The current volatility is 0.51% (8% in annual terms) and the TGARCH plot is displaying a steady volatility curve whose inclination is neither upward nor downward sloping. However, the absence of short term explosion of the conditional variance looks a bit suspicious if compared to the price action that has been plummeting all week long.

There is clearly a violation of the leverage effect process going on because the volatility is not reflecting the actual market conditions. Usually, such a mismatch is a warning signal and it tends to precede drops in the price action.

The HyperVolatility team is bearish British Pound futures because an increase in the conditional variance should now accompany a plunge in futures prices which are likely to retest the 158 – 159 area by Friday.

Japanese Yen Futures Volatility Forecast (06/09/2011)

Japanese Yen futures opened at 130.1 on Monday, rose to 130.4 on Tuesday, jumped to 130.5 on Wednesday, dropped to 130 on Thursday and closed at 130 on Friday.

The volatility is trading around the 0.5% area (7.9% annualised) and the TGARCH plot is now displaying a slightly upward sloping curve which seems to announce a short term increase in the conditional variance although the overall chart shows a fairly stable curve.

The Bank of Japan is still trying to force its currency down in order to counterbalance the massive buying pressure generated by the sell-off in equity markets and by the increased concerns regarding the sovereign debt problems in Europe.

The HyperVolatility team is bullish on Japanese Yen futures because the volatility chart does not seem to present any sign of sharp retracements. Additionally, it is important to point out that the explosion in volatility, at least in the last months, have been caused by an enormous buying pressure rather than a market drop because, as we all know, the Japanese currency is considered to be a safe haven by investors and traders. We are expecting futures prices to skyrocket and achieve the 132 – 133 area by Friday.

E-Mini S&P500 Futures Volatility Forecast (30/08/2011)

E-Mini S&P500 futures opened at 1,124 on Monday, rose to 1,158 on Tuesday, achieved 1,171 on Wednesday, plummeted to 1,157 on Thursday and closed at 1,175 on Friday.

The current volatility is 2.2% (34.9% in annual terms) and the TGARCH plot displays a sideways movement of the volatility curve which clearly implies the fact that many traders and investors have been waiting for Bernanke’s speech. The conditional variance is still extremely high and the mean reverting process should manifest itself over the next trading hours although some short term volatility increases are quite likely to occur.

However, it is important to point out that the overall interpretation of the chart highlights that a softening of the market fluctuations rate is quite likely to happen.

The HyperVolatility team is bullish E-Mini S&P500 futures because the decrease in market volatility should favour a recovery of the price which could eventually retest the 1,230 points by Friday.

It is worth noting that the majority of investors and traders will focus on the macroeconomics news such as manufacturing index, NFP and initial jobless claims and therefore a great deal of attention will be needed during their announcement.

VIX Index Volatility Forecast (30/08/2011)

The VIX Index opened at 42.4 on Monday, dropped to 36.2 on Tuesday, settled at 35.9 on Wednesday, jumped back up on Thursday, when it touched 39.7 and closed at 35.5 on Friday.

The volatility is around 13% (45% monthly) and the TGARCH plot is displaying an overall downward sloping curve which should continue its mean reverting journey in the upcoming hours. The very last part of the chart shows a small retracement but, as mentioned for the VXN Index, the waiting for Bernanke’s speech on Friday made many investors a bit nervous and this caused the conditional variance to increase.

However, even if some short retracements of the volatility can always happen it is worth pointing out that the oscillations of the VIX Index are decreasing and, given what we can see in the chart, it is likely that the next trading days will see an ulterior flattening of the variance.

The HyperVolatility team is bearish the VIX Index because its rate of fluctuations should diminish and the mean reverting process should become more and more evident. Consequently, we expect the VIX to retest the 30% threshold by Friday.

E-Mini Nasdaq Futures Volatility Forecast (30/08/2011)

E-Mini Nasdaq futures opened at 2.047 on Monday, rose to 2,123 on Tuesday, touched 2,139 on Wednesday, dropped back to 2,111 on Thursday and closed at 2,165 on Friday.

The actual volatility is 2% (31.7% annualised) and the TGARCH plot is showing a slightly upward sloping curve which would normally imply an increase in market fluctuations. The price action has been significantly affected by Bernanke’s speech and many traders either adjusted their positions or closed their existing ones before the conference causing a sensible augment in the oscillation rate.

However, the chart is still displaying a mean reverting process which has not completed its journey towards the long term equilibrium point but that is likely to do so in the upcoming hours.

The HyperVolatility team is bullish E-Mini Nasdaq futures because the volatility should soften over the next trading hours favouring a recovery of the price action which should eventually retest the 2,250 points by Friday.

Needless to say that the macroeconomics news that are going to be released will have a massive impact on the price action and some negative figure could drag futures prices back down into the 2,100 area.

VXN Index Volatility Forecast (30/08/2011)

The VXN Index opened at 42 on Monday, dropped to 35.4 on Tuesday, settled at 35.6 on Wednesday, rose to 39.4 on Thursday and closed at 34.4 on Friday.

The actual volatility is 12% (41.5% monthly) and the TGARCH plot is showing a volatility curve which has now created a double top and seems ready to continue its mean reverting journey towards the 4% level (13.8% monthly).   The very last part of the curve displays an insignificant retracement that was caused by fear and nervousness before Bernanke’s speech but that should not alter the overall process.

The HyperVolatility team is bearish the VXN Index because the large up move should start mean reverting at an increased pace over the next trading hours implying that, given the positive correlation between the Nasdaq100 implied volatility index and its stochastic volatility movement, we should see readings around the 30% threshold around Friday, macroeconomics news permitting.

Go back to top