E-Mini Crude Oil Futures Volatility Forecast (06/09/2011)

E-Mini Crude Oil futures opened at 87.5 on Monday, touched 88.8 on Tuesday, settled at 88.9 on Wednesday, dropped to 88.7 on Thursday and closed at 86.7 on Friday.

The actual volatility is 1.8% (28.5% annualised) and the TGARCH plot is showing a curve which is clearly upward sloping and that it seems to signal an ulterior increase in the oscillation rate over the next trading hours. The 1.5% – 1.55% area (23.8% – 24.5% in annual terms) is acting as a support for the conditional variance which inevitably bounce back up all the time the aforementioned threshold get retested.

The fluctuations of E-Mini Crude Oil futures are strongly linked to macroeconomics announcements rather than “micro-exogenous variables” such as demand/supply, inventories, etc and therefore an increase in volatility has to be interpreted as a warning signal.

The HyperVolatility team is bearish E-Mini Crude Oil futures because a spike in the oscillation rate should be accompanied by an ulterior drop in futures prices which are likely to retest the 83 level by Friday.

However, Obama’s speech on Thursday can change the scenario in the case some new fiscal policy measures are going to be announced.

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