E-Mini S&P500 Futures Volatility Forecast (10/04/2011)

The E-Mini S&P500 futures went through a bearish week mostly influenced by the new bad news coming from Japan. In fact, the Index opened at 1,329 dropped at 1,328 and settled at 1,324 on Friday.

The actual volatility is around 0.68% – 0.7% (10.7% – 11.1% annualised) but the TGARCH plot is really flat and in this case a short term explosion of the conditional variance could easily drag down futures prices.

Specifically, the week ahead has 2 potential scenarios: in the first one the volatility remains unchanged and the market keep rising whilst in the second one a slight increase in the market fluctuations rate would push prices even more down.

E-Mini S&P500 futures should sensibly rise in the first days of the week and retest the 1,329 area but it is quite probable that the next trading days will experience a down movement which is going to pull the price around 1,322 points.

The HyperVolatility remains moderately bearish on E-Mini S&P500 futures and we will try to place some shorts once the market will show some weakness (read increasing volatility) even if the first days could eventually show some fragile attempts to sustain the price in the current area.

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