DJ EuroStoxx50 Futures Volatility Forecast (19/09/2011)

DJ EuroStoxx50 futures opened at 2,022 on Monday, rose to 2,047 on Tuesday, touched 2,113 on Wednesday, jumped to 2,176 on Thursday and closed at 2,152 on Friday.

The current volatility is 3.3% (52.3% annualised) and the TGARCH plot is manifestly showing a volatility curve which is moving sideways although still trading in a very high range. The downward inclination of the slope seems suggesting that the upcoming trading days will see an ulterior decrease of market oscillations and that the mean reverting process will finally start to become more and more evident.

The concerns surrounding Europe and in particular Greece are still pretty high amongst investors, however, the decrease in the fluctuation rate is signalling that some investors became more optimistic about the future of the Single currency after the statement that “Greece will remain in the Eurozone” (at least according to Nicolas Sarkozy and Angela Merkel).

The HyperVolatility team is moderately bullish DJ EuroStoxx50 futures because an ulterior drop in the conditional variance could easily support the price action which could head north during the hours and eventually retest the 2,250 area.

On the other hand, the rise in price is going to be very weak and the fact that the volatility curve is still trading around the 3% area implies that the risk of sharp retracements remains concrete.

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