E-Mini S&P500 Futures Volatility Forecast (23/05/2011)

The sideways movement E-Mini S&P futures went through the last week was efficiently captured by the analysis we posted one week ago. Nonetheless, the lateral movement has been followed by a drop but the magnitude of the plunge has not been as consistent as we thought.

The market opened at 1,325 it rallied to 1,338 on Wednesday, it moved even higher on Thursday (1,341) but 1,328 has been the settlement price on Friday.

The volatility is now at 0.78% (12.3% in annual terms) and the TGARCH plot is displaying a slightly downward sloping curve although the very last part of the chart seems suggesting a shy attempt of the oscillation rate to move higher again.

Clearly, the decrease in the conditional variance has been provoked by the sideways movement of futures prices and it is not attributable to a drastic market view of investors and traders.

The HyperVolatility team remains bearish on E-Mini S&P500 futures because it is quite likely that the volatility will spike up again over the next trading days and eventually achieve the 1% – 1.04% area (15.8% – 16.5% annualised) whilst futures prices should plummet once again and retest the 1,300 threshold.

However, once futures prices will have achieved the aforementioned support is quite likely for the price to move within a narrow range once again.

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