DJ EuroStoxx50 Futures Volatility Forecast (04/07/2011)

The last week we were bullish DJ EuroStoxx50 futures and 2,800 was our profit target for the week. Needless to say, the HyperVolatility team provided our readers with forecasts which turned out even more profitable than we thought in the first place.

In particular, the market opened at 2,731, rose to 2,768 on Tuesday, kept on going up on Wednesday where it touched 2,810 and continued to rally until the end of the week, in fact, 2,856 and 2,888 have been the last closing prices on Thursday and Friday respectively.

The volatility is now at 1.24% (19.6% annualised) whilst the TGARCH plot is now displaying an upward sloping curve, although the slope is not that steep, and therefore it is reasonable to believe that the next trading hours are going to see a more volatile price action.

It is reasonable to believe that the first half of the week will present a slow movement of the price with a sideways movement or eventually a short term break out of the 2,900 points however, in the second half the volatility should manifest itself and bring futures prices back down.

The HyperVolatility is moderately bearish on DJ EuroStoxx50 futures prices because the steady rally has been favoured by the Greece’s decision to vote for the austerity package but the shy augment in variance, despite the up move, should be interpreted as a warning signal. Specifically, we believe that the price will retest the 2,700 – 2,750 area by Friday but the down move should be neither extreme nor fast but rather slow and constant.

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