E-Mini S&P500 Futures Volatility Forecast (08/08/2011)

The American economy has been hit by very bad macroeconomics figures and the US debt ceiling problems accentuated traders ‘concerns dragging the index down. Specifically, E-Mini S&P500 futures opened at 1,279 on Monday, dropped to 1,247 on Tuesday, rose to 1,254 on Wednesday, plummeted to 1,199 on Thursday and closed at 1,197 on Friday.

The volatility is now 1.78% (28.2% annualised) and the TGARCH plot is undoubtedly upward sloping implying that the big drop is far from being over. Particularly, the volatility does not show any retracement and its explosion was as rapid as “clean” (with no short term fluctuations of the curve) and consequently it is very probable that the conditional variance will keep augmenting over the next hours.

The US debt concerns, the S&P downgrading of US sovereign debt, the bad macroeconomics data about the manufacturing industry, the concerns about a potential default of big European countries have completely knocked down investors’ confidence and the panic is the only thing left in the market.

Furthermore, the slightly better than expected news coming from the NFP did not really help market sentiment even if on Tuesday the FOMC will try to regain a bit of credibility.

The HyperVolatility team is extremely bearish on E-Mini S&P500 futures because the oscillation rate should increase even more over the next hours dragging the price back down in the 1,050 – 1,100 area by Friday.

Beware of market up movements because, with this volatility, they are more likely to be bull traps rather than a bargain opportunity.

2 Responses to E-Mini S&P500 Futures Volatility Forecast (08/08/2011)

  1. the market is going to take a long time for people to trust

    • Well, the market has been moved largely by speculators lately. The economy did not change much in the last 3-4 months and it is not really a surprise that we are not growing as quickly as we should but, for some reasons, people are now freaking out. Historically, during summer time there is no much hiring and the industrial production slows. It is not a ground breaking news really. Also, the US debt downgrading is not really a new thing to market participants.Everybody knows that the US has got more than 14 trillion debt but none mentioned the fact that the States have been increasing the debt ceiling something like 6 times in the past decade.The only difference is that, in the past, it wasn’t a big deal but now it’s catastrophe (or at least so they want to sell it).

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