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E-Mini S&P500 Futures Volatility Forecast (14/08/2011)

The HyperVolatility team was right once again and the profit targets we suggested the last week have been successfully hit by futures prices making our analysis, once again, accurate and profitable. In particular, E-Mini S&P500 futures opened at 1,111 on Monday, rose to 1,171 on Tuesday, dropped to 1,123 on Wednesday, rose to 1,168 on Thursday and closed at 1,177 on Friday.

The actual volatility is 3% (47.6% annualised) and the TGARCH plot is evidently showing a downward sloping curve whose mean reverting process seems to be on its way. The fluctuations rate should decrease over the next trading hours because the conditional variance will try to settle around the 1% threshold (15.8% in annual terms) even if a short term, although not violent, increases of volatility are very likely to occur along the way down.

It is worth noting that this week most of the macroeconomics news coming from the US has been encouraging: better than expected initial and continuing jobless claims, better than expected core sales and lower than expected Federal budget deficit.

The HyperVolatility is bullish E-Mini S&P500 futures because the plummeting volatility curve is a clear signal that the down movement is now over and that many investors and traders are now buying back the market.

Moreover, the positive macroeconomics news and the decrease in the fluctuations of the VIX are all factors that are pointing towards a recovery of the price action. E-Mini S&P500 futures should eventually touch 1,250 – 1,260 points by Friday, credit rating agencies permitting.

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