E-Mini S&P500 Futures Volatility Forecast (17/10/2010)

The TGARCH volatility even this week showed a very weak upward movement. The chart is particularly interesting since such a drastic and constant decline in conditional standard deviation is not usual.

The E-Mini S&P500 Futures market touched 1700 this week again signalling an apparent strong uptrend, however, in the last 2 weeks it appears that the volatility is increasing in value despite the high levels achieved by the Index.

Nevertheless, the staff of HyperVolatility still believes that a downward correction of the market is imminent and therefore the recent rallies represent an excellent selling opportunity.

The TGARCH volatility should gets back to 12% – 16% in the upcoming 3 weeks driving the market down for several days. Furthermore, the volume figures backing the bullish movement seems not to be comforting and this is another factor which supports our hypothesis. The macro economics data released this week will be very important.

Last but not least,  be careful at the opening of the next Monday. The last Friday the futures on German bunds expired and it is reasonable to believe that hedge fund and money managers will place new positions the next Monday according to their forecasts and consequently an unfilled gap down or a distant gap up would represent strong signals.

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