DJ EuroStoxx50 Futures Volatility Forecast (31/10/2010)

The DJ EuroStoxx50 Futures Index experienced a weak down move lately and this is clearly reflected by the shy augment in volatility at the very end of the chart.

Having said that, we remain sceptic about a further rally of the Index unless better than expected news hit the market.

The volatility seems to have reached the bottom and, statistically speaking, it is more probable a volatility explosion rather than an ulterior drop because that would imply an estimation of the conditional standard deviation close to zero.

The staff of HyperVolatility is looking for short opportunities and believe that the next week will show a downward movement of the market with the TGARCH volatility rising to 1.5% – 1.8% . The last week forecast were quite accurate since the DJ EuroStoxx50 dropped as we expected but we believe that the short season has just commenced and therefore we advise not to buy additional lots.

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