DJ EuroStoxx50 Futures Volatility Forecast (05/10/2011)

DJ EuroStoxx50 futures opened at 2,097 on Monday, touched 2,163 on Tuesday, plunged to 2,138 on Wednesday, rose to 2,203 on Thursday and retraced to 2,148 on Friday.

The volatility is around 2.5% (39.6% in annual terms) and the TGARCH plot is manifestly displaying a downward sloping curve which seems now ready to start its mean reverting journey towards the medium term equilibrium point which is set around the 1.2% threshold ( 19% annualised).

It is worth noting that this is the first time in 2 months that the volatility curve manages to break through the 2.7% support (42.8% in annual terms) implying that, although some short term retracements are almost inevitable, the conditional variance should probably keep plummeting over the next hours.

The situation in Europe is far from being rosy but some encouraging words are being heard from European politicians which are trying to secure banks exposed to Greece CDS.

The HyperVolatility team is moderately bullish DJ EuroStoxx50 futures because the softening oscillation rate should back the price action that could potentially settle around the 2,220 area before Friday, news permitting.

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