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E-Mini Nasdaq Futures Volatility Forecast (29/05/2011)

The last week our bearish expectations have not been met and therefore we did not enter the market at all. In fact, E-Mini Nasdaq futures opened at 2,315 dropped to 2,309 on Wednesday but Thursday and Friday saw a steady and sharp recovery of the price in fact 2,326 and 2,333 have been the last 2 closing prices before the end of the week.

The actual volatility is 0.97% – 0.98% (15.3% – 15.5% annualised) and the TGARCH curve is aggressively downward sloping highlighting the fact that the up move in futures prices was robust and steady.

The volatility will try to mean revert towards its equilibrium point which is around 0.5% (7.9% in annual terms) and such a phenomenon should favour an ulterior recovery of the price at least in the short term.

The HyperVolatility team is moderately bullish E-Mini Nasdaq futures because the decreased market fluctuations rate is going to sustain the price action which could eventually achieve 2,340 points by the next Friday.

Nevertheless, we will enter the market only if the conditional variance keeps plummeting during the first trading hours but should not that be the case we would wait for a more statistically reliable opportunity to arise.

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