DJ EuroStoxx50 Futures Volatility Forecast (05/12/2010)

Everything we forecasted the last week really happened!!! The price achieved the 2790 -2800 area but the beginning of the week saw a heavy drop which turned the last days in a very volatile and sideways week.

The drop that the volatility had in the DJ EuroStoxx futures is tremendous. The curve went from 1.6% (25% annualised) to 0.9% (14% in annual terms) in a few days and the price was driven back to 2790-2800 as correctly forecasted the last week.

The volatility will probably rise again because such a sharp and fast drop in a relatively short period of time is unusual and therefore we are expecting some very short term retracements.

On the other hand, the great response that equity markets had to the Non-Farm payroll figures significantly surprised us and we believe that the DJ EuroStoxx could seriously head north during the end of the next week. Consequently, prices should achieve 2850 and fluctuate around that area.

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