DJ EuroStoxx50 Futures Volatility Forecast (30/08/2011)

DJ EuroStoxx50 futures opened at 2,171 on Monday, touched 2,234 on Tuesday, achieved 2,250 on Wednesday, plummeted to 2,194 on Thursday and closed at 2,199 on Friday.

The volatility is 2.1% (33.3% annualised) and the TGARCH plot is showing an overall downward sloping curve which seems to be in the final part of its mean reverting journey towards the 0.8% – 1% area (12.6% – 15.8% annualised). However, the very last part of the curve shows a shy retracement of the conditional variance, which has been mainly caused by nervous market moves pre-Bernanke’s speech, and that should not represent a warning signal.

The HyperVolatility team is moderately bullish DJ EuroStoxx50 futures because the conditional variance should keep plummeting over the next hours, although some short term bursts are almost inevitable, and we believe that the 2,260 points will be achieved by Friday.

This week most of the attention will be concentrated on the Italian auction, Manufacturing Index and Non Farm Payrolls and bad figures could surely increase investors’ fear even more.

A great deal of attention will be needed during the upcoming days because even if the volatility should keep plummeting because a negative figures in a leading macroeconomics indicator could easily unleash an ulterior sell-off.

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