E-Mini Nasdaq Futures Volatility Forecast (15/05/2011)

E-Mini Nasdaq futures were expected to rise but the massive drop in commodity markets pushed down most of the world equity indices including the Nasdaq. The market opened at 2,387 rose to 2,408 on Tuesday, on Wednesday it plummeted to 2,393 but on Thursday it rallied back to 2,408 and it closed at 2,371 on Friday: a really choppy week!!!

The volatility is around 0.78% – 0.8% (12.3% – 12.6% in annual terms) but the TGARCH plot is now displaying a downward sloping curve which should be carefully interpreted. The conditional variance has been trading in its lowest level for almost 1 month and it is reasonable to wonder: is this going to last forever?

Obviously, the answer is no and it is quite likely that a volatility explosion is going to manifest itself in the upcoming trading days. Furthermore, if we consider that the Hi-Tech Index is one of the most volatile equity indices in the world, it is evident that the current situation is unsustainable.

The HyperVolatility team is bearish on E-Mini Nasdaq futures because we believe that the increase in volatility will drag futures prices back into the 2,345 – 2,350 area by the next Friday.

However, a sideways movement should accompany the price action in the first half of the week and most of the action should be concentrated in the 2nd half.

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