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E-Mini S&P500 Futures Volatility Forecast (22/08/2011)

The market headed north in the first half of the week, meeting our last week’s expectations, but the disappointing figures related to the US manufacturing industry and the medieval approach to economics that some European politicians have, certainly helped to destroy investors’ confidence even further.

E-Mini S&P500 futures opened at 1,196 on Monday, dropped to 1,192 on Tuesday, plummeted to 1,189 on Wednesday, plunged to 1,144 on Thursday and closed to 1,123 on Friday.

The current volatility is 2.6% (41.2% in annual terms) and the TGARCH plot is showing an insistently upward sloping curve which seems suggesting that the upcoming days will see an ulterior increase in the oscillation rate although the present readings are well higher than the equilibrium point and still dangerously close to what we saw in the 2008- 2009 crash.

The HyperVolatility team remains bearish E-Mini S&P500 futures because the conditional variance is still very high and the VIX Index is not showing any sign of rest. There will be some short term uptrend but the overall week should not see a robust recovery of the price because it will take some times for the market to attract some buyers.

We expect futures prices to plunge over the next trading days and eventually retest the 1,000 level by Friday. No long position should be entered during this week even if the market could potentially show some movement on the upside.

This week all eyes will be on Europe because quite a few macroeconomics data are going to be released but on Friday a great deal of attention will be needed since investors will switch the focus on Bernanke’s speech.

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