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E-Mini Nasdaq Futures Volatility Forecast (19/09/2011)

E-Mini Nasdaq futures opened at 2,196 on Monday, jumped to 2,220 on Tuesday, rose to 2,250 on Wednesday, achieved 2,291 on Thursday and closed at the same price on Friday.

The current volatility is 1.3% (20.6% annualised) and the TGARCH plot is clearly displaying a downward sloping curve which implies that the upcoming days could see a diminished rate of volatility and welcome a recovery of the price action. However, this level proved to be a strong support level in the past and a failure to break through the 1.1% – 1.2% area (17.4% – 19% in annual terms) would probably signal that the volatility could keep going up and eventually retest the 2% area (31.74% annualised).

The HyperVolatility team is moderately bullish E-Mini Nasdaq futures because the decrease in the conditional variance should keep the price action up. Specifically, there is a chance that the 2,350 – 2,370 area get retested before the end of the week but the movement is likely to be very weak and choppy.

The fact that the volatility is diminishing does not mean that short term retracement of futures prices are to exclude. The nervousness amongst investors is palpable and any negative news could change the direction of this fragile market.

Needless to say that the FOMC statement is going to play a key role this week and it is definitely worth watching.

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