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DJ EuroStoxx50 Futures Volatility Forecast (21/06/2011)

The last week we were waiting for the DJ EuroStoxx50 futures to retest the 2,780 level and effectively so it was. Futures prices opened at 2,726, tried to break through 2,780 on Tuesday but bears pushed the price back to 2,714 on Wednesday, however, both Thursday and Friday saw a fairly good recovery of the price because 2,719 and 2,770 have been the respective closing prices.

The volatility is now at 1.6% (25.3% in annual terms) and the TGARCH plot is now showing a downward sloping curve which is going to end its mean reverting process once the 1% level (15.8% annualised) will be touched.

The decreasing conditional variance should favour a recovery of the price, despite of the bad news regarding the Euroland, which should rise constantly over the next trading hours.

Also, the augment in price could be even characterised by violent movements because during the mean reverting process the variance tend to move quite slowly at the beginning but very quickly towards the end and therefore some big buying pressure should be expected during the next hours.

The HyperVolatility team is bullish DJ EuroStoxx50 futures because we believe that the price should reach 2,850 by Friday, volatility permitting.

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