E-Mini S&P500 Futures Volatility Forecast (19/09/2011)

E-Mini S&P500 futures opened at 1,163 on Monday, rose to 1,171 on Tuesday, jumped to 1,187 on Wednesday, achieved 1,211 on Thursday and closed at 1,214 on Friday.

The actual volatility is 1.4% (22.2% annualised), which is still a fairly high value if we consider an average fluctuations rate of 0.7% – 0.8% (11.1% -12.6% in annual terms), but the slope of the curve is now clearly downward sloping. Hence, the upcoming days should see an ulterior flattening of the conditional variance which, ceteris paribus, should complete the mean reverting process and settle around the abovementioned average values.

The current week does not present much macro-economic news coming from the States, apart from the FOMC announcement, and as a consequence most of investors’ eyes will focus on the European sovereign debt crises.

The HyperVolatility team is moderately bullish E-Mini S&P500 futures because, should the volatility keep in its downward trend, the price could touch the 1,230 – 1,240 by Friday.

The market remains highly unstable and any bad news coming from European politicians is going to provoke a short term sell-off which would completely twist our analysis.

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