E-Mini Crude Oil Futures Volatility Forecast (02/08/2011)

E-Mini Crude Oil futures prices opened at 99.1 on Monday, rose to 99.4 on Tuesday, dropped violently to 97.2 on Wednesday and remained at that same level on Thursday whilst the last closing price was 95.87 on Friday.

The current volatility is 1.78% (28.4% annualised) and the TGARCH plot is displaying a downward sloping curve which is trying to complete its mean reversion process towards the long term balance point which, for this market, is stable around the 1.68% – 1.7% threshold (26.6% – 26.9% in annual terms).

It is important to mention that E-Mini Crude Oil futures are quite close to the $100 resistance level which has been violated only twice in the last 2 years and therefore it is reasonable to expect some choppy trading accompanied by short term volatility rises.

The HyperVolatility team is bearish E-Mini Crude Oil futures because the fairly low volatility curve should mean revert, at least in the short term, and bring some more market fluctuations whilst the closeness of the price action to the $ 100 barrier should keep away many bulls.

Therefore, we expect the market to retrace in the upcoming days and the $ 93.80 threshold could be eventually retested by Friday.

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