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Thursday 01/2612 – Key Futures Trading Levels via CME Pit IQ

Equity Futures:

Online Trading Tool: Pit IQ (Pit Intelligence) - Daily Online Trader Access to Trading Key Strategies, Setups & Levels live from the CME Trading Floor (Pits) in Chicago.

Tuesday 01/17/12 – Key Futures Trading Levels via CME Pit IQ

Equity Futures:

The Single currency has been hit by the heavy appreciation of the greenback that was, in turn, caused by a constant decrease of equity indices. Principally, the market opened at 1.4571, rose to 1.4687 on Tuesday but it retraced to 1.4575 on Wednesday and the down move continued until the end of the week because 1.4504 and 1.435 have been the closing prices on Thursday and Friday respectively

The actual volatility is 0.7% (11.1% in annual terms) and the TGARCH plot is now displaying a curve which surely increased but is still trading within its equilibrium range which goes from 0.58% to 0.77% ( 9.2% – 12.2% in annual terms).

The last week we were expecting an ulterior rise of Euro futures and effectively so it was. Specifically, futures opened at 1,4274 rose to 1.4328 on Wednesday, jumped to 1.4489 on Thursday and closed at 1.4633 on Friday.

 

The current volatility is 0.59% (9.3% in annualised terms) and the TGARCH curve is evidently falling although the massive rally which brought the single currency to heavily appreciate against the US dollar even if the critical and renewed attention of financial media on Greece’s sovereign debt.

The last week we were expecting a drop of the Index in the 2,805 - 2,810 area and effectively so it was. In fact, the market opened at 2,787 moved higher and touched 2,809 on Wednesday, it rallied to 2,818 on Thursday but 2,808 was the settlement price registered on Friday. 

The volatility is around 0.98% - 1% (15.5% - 15.8% annualised) and the TGARCH plot is evidently displaying a curve which is trying to complete a mean reverting process whose run is going to end once the 0.8% support (12.6% in annual terms) is touched.

The great uncertainty that characterised most of the equity markets pushed many investors and traders towards a safer type of investment and this resulted in increased German Bund futures prices.

The market opened at 125.1 and moved around this value for about 2 days but the final part of the week saw a sharp rise in price which at first brought German Bund futures to 125.5 euro whilst on Friday the price action remained almost unchanged; in fact, 125.59 euro was the final closing price.

The US dollar heavily plummeted over the last week and this phenomenon totally twisted all our analysis. Euro futures opened at $ 1.4046 fluctuated around $ 1.4080 for a couple of days and finally rallied to $ 1.413 on Thursday but even in this case, the final price was much higher than Monday’s opening: 1.4292 was the registered closing price on Friday.

The volatility is now 0.72% (11.4% in annual terms) but the chart is still displaying a downward sloping curve which highlights the fact that the depreciation of the US dollar against the Single Currency is likely to continue.

Euro futures went through a sideways week like many other markets during the last 5 trading days. Specifically, the price opened at 1.4167 rose to 1.43 on Thursday but it sharply dropped to 1.4156 on Friday.

 

The actual volatility is 0.63% (9.9% annualised) but the TGARCH plot is now displaying a decreasing volatility curve which highlights a great divergence between market fluctuations and the significant drop of the price which brought the market to close to 1.415 on Friday.

The US dollar kept appreciating against the European currency because the volatility broke through the 0.7% (11.1% annualised) and the bearish week opened at 1,4345 plummeted to 1,4187 whilst 1,4089 was the closing price registered the last Friday.

  

The actual volatility is 0.87% (13.8% in annual terms) and, although the TGARCH curve seems highlighting a potential drop of the oscillation rate, the conditional variance did not decrease sharply as it usually happens when the down move runs out of steam after a significant price drop: meaning that the down move is not over yet.

Euro futures kept increasing although the evident weakness of the market. In fact, the price opened at 1.462 on Monday, rose to 1.4767 and then closed to 1.4789 on Friday.


 

The actual volatility is around 0.43% (6.8% annualised) and the TGARCH plot is displaying a quite unstable situation since the volatility curve is still moving within a very narrow range and its current measurement is clearly very low.

The HyperVolatility team was right once again because the 1.43 profit target we forecasted the last week has not been simply hit but it has been heavily surpassed making our analysis even more profitable and useful than what we thought in the first place.            

The market opened at 1.4215 rallied to 1.4501 on Wednesday and 1.4531 was the closing price on Thursday: a wonderful trade!!!

The volatility is now extremely low and the decrease was clearly caused by the sharp rally which brought futures prices in the current level. Specifically, the conditional variance is around 0.47% (7.4% annualised) and statistically speaking there is a very high probability that the week ahead would see an increase in volatility because the curve will try to settle around the 0.53% - 0.55% area (8.4% - 8.7% annualised).

Consequently, the week ahead could experience some higher volatility and the price is going to be irremediably affected by this phenomenon because such an augment should drag futures prices back down in the 1.4350 area.

The HyperVolatility team is moderately bearish on Euro futures because the continuous depreciating process of the US Dollar against the Single currency is going to retrace and such a low volatility measurement is a clear signal that more turbulence is expected in the short term (particularly around the 1.46 threshold should the price gaps up on the opening).

The chart displays a volatility curve which significantly surpassed the 0.85% (13.4% annualised) figure at which we said we would enter our short positions and effectively our forecast proved profitable once again because the retracement we were expecting manifested itself and we managed to capture it. A great trade indeed!!!                                   

The actual volatility is around 1.1% (17.4% in annual terms) and although the TGARCH curve is now downward sloping we believe that the down move is not over yet.

The last week we forecasted a bearish price movement which would have turned into a bullish market if the volatility had remained stable. Though, the volatility plot displays a sharp explosion of the conditional variance which accompanied a boost of Bund futures from 119.9 to 120.7 euro.      

The actual TGARCH curve is showing a mean reverting process whose value is close to 0.38% (6.03% annualised) and it is quite likely that over the next trading days the conditional variance will keep diminishing. As a consequence, the German Bund could rise once again because the volatility curve will try to get back into the 0.34%area (5.3% in annual terms).

Euro Futures were expected to move higher and effectively so it was until the last Thursday when the last attempt to break through the 1.45 resistance failed. However, our forecast proved profitable once again because we warned our reader against a possible retracement in this area and therefore we all hope you benefited from our analysis and closed your longs on Thursday.                                           

The current volatility is around 0.48% (7.6% in annual terms) but the curve seems highlighting an ulterior increase of market fluctuations over the next trading days.