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E-Mini Nasdaq Futures Volatility Forecast (10/04/2011)

E-Mini Nasdaq futures unexpectedly dropped over the last week dragging the price back into the 2,320 area despite the volatility plot remained practically unaltered.

Specifically, the actual volatility is around 0.73% (11.5% annualised) and the TGARCH curve does not suggest any potential rise in the conditional variance over the next trading days. On the other hand, the price drop we had the last week was not accompanied by a surge of market fluctuations meaning that many investors did not probably liquidate all their long positions.

However, we believe that, although the TGARCH curve is flat, a short term retracement is already on its way but it could be anticipated by a last attempt to bring the price back into the 2,335 – 2,340 area.

The HyperVolatility team is expecting a sideways movement of this market because the volatility could increase over the next trading days pushing down prices even further. Consequently, we will wait for the conditional variance to augment before placing our short position but should not that be the case we will probably step aside and monitor the volatility while waiting for the next week.

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