DJ EuroStoxx50 Futures Volatility Forecast (02/08/2011)

DJ EuroStoxx50 futures opened at 2,742 on Monday, dropped to 2,733 on Tuesday, plummeted at 2,666 on Wednesday, touched 2,667 on Thursday and closed at 2,650 on Friday.

The current volatility is 1.5% (23.8% in annual terms) and the TGARCH chart is evidently showing a volatility curve which, although still upward sloping, has reached one of the highest levels over the last 5 months and seems almost ready to begin its mean reverting process.

DJ EuroStoxx50 futures are still in a medium term bearish trend and the resistance that investors and traders will try to break is the one placed at 2,800 but this level, historically, has not proved to be that strong and therefore there should not be much volatility hitting the market should the price rally through this point.

The HyperVolatility team is bullish the DJ EuroStoxx50 futures because, although the first half of the week could bring more volatility as highlighted by the chart, the second one should see the market rally accompanied by a mean reverting movement of the oscillation rate. We are expecting the European Index to retest the 2,870 – 2,880 area by Friday.

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