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E-Mini Crude Oil Futures Volatility Forecast (24/10/2010)

The Crude Oil price is obviously affected more by the seasonal effects, hence, demand and supply are fundamental indicators for this market.

As we mentioned during the previous weeks, the crude oil futures market tends to rise until October and then decrease again. The plot now shows a stable fluctuation of volatility and it seems that the sharp downward movement, which clearly support an uptrend, is now over. Is this sideways move of volatility a reversal signal? The probability is high and there are at least 3 reasons backing our hypothesis:

1) Many companies already bought all the oil they needed and their stocks are now full.

2) The seasonality worked well over the last 40 years creating a perfect cycle (even if there is no certainty that this will happen again)

3) The down trend showed in the volatility chart is now fnished and it is likely that a peak in volatility will be accompanied by a new market trend

The staff of HyperVolatility recommends to enter short positions because the uptrend is clearly losing momentum, hence, banking your profits and closing out your longs would be a wise strategy to adopt.

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