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DJ EuroStoxx50 Futures Volatility Forecast (27/09/2011)

DJ EuroStoxx50 futures opened at 2,100 on Monday, touched 2,105 on Tuesday, dropped to 2,048 on Wednesday, plunged to 1,986 on Thursday but settled to 2,020 on Friday.

The current volatility is 2.6% (41.2% annualised) and the TGARCH curve is evidently showing an upward sloping curve which seems suggesting that an ulterior augment in the oscillation rate should be expected in the upcoming trading days. However, the 3% volatility level (47.6% in annual terms) proved to be a solid support in the previous week and only a breakthrough of this threshold would provoke a further explosion which would push the oscillation rate towards the 4% again (63.4% in annual terms).

The concerns about the stability of peripheral European countries hit heavily all markets and the DJ EuroStoxx50 is clearly not an exception to the rule. Most of the attention will be concentrated on the 2-3 trillion parachute that EU policy makers are thinking of implementing and this could add many speculative bidders to the crowd.

The HyperVolatility team is moderately bullish this market because the high volatility levels should soften and head south before Friday although some short term explosions are still probably. Consequently, we are expecting the price to retest the 2,150 – 2,180 area by Friday because the diminishing rate of market fluctuations should allow the price action to regain terrain.

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