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E-Mini Nasdaq Futures Volatility Forecast (27/06/2011)

The market opened at 2,199 rose to 2,243 on Tuesday, dropped back to 2,229 on Wednesday, topped at 2,238 on Thursday and finally closed at 2,208 on Friday. The last week we were bullish E-Mini Nasdaq futures (2,255 was our profit target) and our forecast was very accurate but, once again, the great uncertainty which dominated most of the equity markets managed to scare away many investors who decided to get rid of their long positions.

The current volatility is 1.3% (20.6% annualised) and the chart is visibly displaying a curve which is still trading very far from the equilibrium point (confront this chart with the previous week one). The actual situation is not sustainable in the long run and it is very probable that the conditional variance will start its mean reverting process towards the 0.42% level in the upcoming hours.

The volatility was supposed to commence the mean reverting movement the last week but the announcements of bad macroeconomics news managed to keep the panic up and consequently the variance.

The HyperVolatility team remains bullish E-Mini Nasdaq futures because the distortive effect of news on market price should now be over and the conditional variance should now start to complete its expected movement towards the status quo. Consequently, the drop of market volatility is going to favour a recovery of the price which should retest the 2,260 area by Friday.

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