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DJ EuroStoxx50 Futures Volatility Forecast (10/04/2011)

The last week we were expecting DJ EuroStoxx50 futures to achieve 2,900 points and the HyperVolatility team was right once again. Particularly, the market opened at 2,888 rose to 2,901 and closed at 2,899 on Friday. A very successful trade!!!

The actual volatility is around 0.6% (9.5% in annual terms) but the TGARCH curve is back in the equilibrium point and looks extremely flat suggesting that the recent up move of the Index could be now exposed to some sideways play or short term retracements.

On the other hand, the European Index should be favoured from such a low conditional variance measurement and it should head north once again over the next trading days, although the higher it goes the higher is the probability of a trend “adjustment”.

The HyperVolatility team remains bullish on DJ EuroStoxx50 futures and we will buy some futures as long as the TGARCH curve remains unaltered because in this case we believe that the 2,930 level could be achieved, even if our stops will be extremely tight.

Nevertheless, we know that the volatility has now touched the bottom and in order not to burn the profits accrued during the recent weeks we will enter some shorts as soon as the conditional variance will touch the 0.85% – 0.9% area (13.4% – 14.2% annualised).

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