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E-Mini S&P500 Futures Volatility Forecast (12/10/2010)

The E-Mini S&P500 futures Index has a great inverse correlation with the German Bund.In other words, if the first goes down the 2nd goes up and vice versa. Therefore, if we were talking about an abvious buying opportunity in the Bund futures market, the chart on the left VISIBLY suggests that a selling climax is going to happen in the S&P500.

Watch out, stormy weather is expected !!!!

The TGARCH volatility touched a ridiculously low level at 0.1%  and it is reasonable to believe that the E-Mini S&P500 has reached its top and it is now ready for a retracement which seems to be quite consistent (given the velocity the volatility droppped).

The last part of the chart suggests that the down movement is already on is way and the great uncertainty surrounding the financial recovery helps feeding such theory although classical technical analysis still highlights a bullish trend.

However, time series analysis and stochastic volatility measurements performed on larger samples confirm the fact that the bullish move is running out of steam and bears are getting back into the game.

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