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E-Mini S&P500 Futures Volatility Forecast (01/02/2011)

The E-Mini S&P500 futures forecasts we gave you the last week proved extremely profitable if we ignore the shocking trading session of Friday and therefore we hope you closed all the long positions on Friday morning (as soon as the market began to drop).

However, the great pull back that dragged the price back into the 1,270 area did not twist the volatility plot which slightly decreased to 0.82% (13.01% annualised) and such a phenomenon is, to us, a warning signal. Specifically, the drop was not consistent and all these bounces that the price had lately around the 1,300 area look like an accumulation period.

The volatility will tend to decrease and probably will get back to 0.6% (9.5% in annual terms) by the end of the week. Consequently, the price should return once again in the 1,300 area and that is why the staff of HyperVolatility advises you to keep going long. Moreover, if we add that the volatility of the VIX index is decreasing the probability for the E-Mini S&P500 to rally largely increase

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