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

Equity Futures:

The bullish forecast we gave you the last week proved to be very good and precise because the VXN opened at 19.5% (which was our initial target) it touched 19.9% on Wednesday, it plunged to 19.1% on Thursday and closed at 19.5% on Friday

The volatility of the VXN Index at first rose and achieved 9% (31.1% monthly) but in the very last part of the week it suddenly began to drop and mean revert toward the equilibrium point which is still stable around the 4% area (13.8% monthly).

The last week we were bearish the VXN Index but the great deal of uncertainty, the light volume, the bank holiday and the massive amount of macroeconomics news that have been released lifted the implied volatility of the Nasdaq Index. In fact, the VXN opened at 16.4% rose to 18.7% on Thursday and closed at 18.9% on Friday.

The current volatility is 8% (27.7% monthly) and the TGARCH plot is displaying a steep increase of the conditional variance which is followed by a shy drop. However, the plummet that is barely visible at the right hand part of the volatility chart has been mainly caused by the lateral movement of the oscillation rate occurred during the last 2 days of the week.

The last week we gave you a 2 way scenario where in the 1^st case we would have seen a short term explosion of market fluctuations whilst in the 2^nd a fairly stable and dropping volatility situation was described. Apparently, the 2^nd forecast turned out to be the most relevant one. In fact, the VXN Index opened at 19.21% dropped to 18.16% on Wednesday and settled at 19.21% on Friday.

The current volatility is 5.7% (19.7% monthly) and the TGARCH plot is showing a continuous and persistent condition in which the conditional variance is low and trading within a very narrow range.

The VXN was expected to rise but the conditional variance of the implied volatility index did not move much from where it was the last week and the TGARCH plot is clearly displaying the aforementioned scenario.

The volatility is now around 4.8% - 5% (16.6% - 17.3% monthly) and the         curve is clearly downward sloping and during the upcoming days the variance could collapse and retest 4% (13.8% monthly) which is the equilibrium point but once touched this level it would not be surprising to see a further increase.

The HyperVolatility team was right once again!!! We were expecting a further drop of the implied volatility of the Nasdaq Index and effectively so it was. Specifically, the market opened at 17.2% dropped to 16.2% but closed at 16.5% on Friday.

 

The current volatility is 5.1% (17.6% monthly) and the TGARCH plot is displaying a downward sloping curve highlighting the fact that a further decrease of implied volatility could characterise the first days of the week.

The great drop that pushed the Nasdaq Index down the last Monday did not really affect its implied volatility Index whose fluctuations continued to decrease constantly over the last days. In fact, the VXN opened at 18.4%dropped to 16.4% and closed at 15.8% on Thursday.

The actual volatility is 4.1% (14.2% monthly) and the slope of the curve is clearly signalling that the conditional variance of the VXN Index has now touched the bottom and that it will probably remain stable over the next trading days.

The last week we were bearish on the VXN Index and our analysis proved accurate once again. In fact, the market opened at 19.09% dropped to 18.5% and closed on 17.48% on Friday.                   

     

The actual volatility has now achieved the bottom and it is currently trading around 4% (13.8% monthly). However, the decrease in the VXN was quite smooth and without short term retracements that make the current figure both quite suspicious and unstable.

The bearish view we had on the VXN Index paid off, although we were expecting a more robust movement, since the market opened at 20.05% dropped to 19.32% and closed at 19.76% on Friday.  

The current volatility of the VXN Index is 5.3% - 5.6% (18.3% - 19.4% monthly) and the TGARCH curve shows, once again, a downward sloping curve which is probably going to bottom around 4% - 4.5% (13.8% - 15.5% monthly).

Our bearish view on the VXN Index has been confirmed, although on Monday the opening was at 20.78%, because the implied volatility of the Nasdaq Index collapsed to 19.41% the last Friday.

The actual volatility is 5.3% (18.3% monthly) but the TGARCH curve is still downward sloping highlighting that the mean reverting process has not been completed yet.

The last week a drop in VXN volatility was forecasted by our staff and indeed we have seen the index opening at 23.82%, dropping to 20.59% and closing at 20.78% the last Friday. HyperVolatility was right once again.

The volatility of the VXN Index is now fluctuating around 7.7% (26.6% monthly) and the TGARCH plot seems suggesting a further plummet of the conditional variance in the upcoming trading days.

The rise in volatility that we forecasted the last week evidently occurred and the staff of HyperVolatility was right once again!!! The VXN Index opened at 23.1% on Monday rallied at 28.4% on Thursday and closed at 26.6% on Friday: the combined strategy was quite fruitful.

The volatility is now at 11.7% (40.5% annualised) and it is probable that market fluctuations will start diminishing over the next trading days. The VXN Index will tend to head south and the TGARCH curve should touch 8% (27.7% annualised) by the end of the week if the macro scenario does not change much.