So I guess the question for VXX longs would be - does that environment actually make it more likely to profit - an environment with a low VIX, low front month futures, and low expectations for future volatility. Eventually, you'll get a spike (probably quarterly or so) of 25% - would it actually be a better situation because you can cheaply wait, take the profit, then wait for a reentry?
Having wrote what I just wrote I expect a 5-7% market correction and a spike in the front month contract back to 16 is imminent, maybe starting Monday. I have never before seen the market index skews this low when the VIX was also like this. 20% IMHO that this week will usher in a correction of 15% or more. Have no idea what the catalyst would be and must admit that with the Fed dumping a $1trillion in hot money into the now bullish money center banks all bets are off.
I have two systems for VXX shorting. The main system is just go short whenever the spot vix 17 day is below the 60 day. Won't be getting many short signals there going forward.
I have a subsystem, though, that creates an index weighted 60% to the front month contract as compared to the historical average of 19 and 40% weighted to (second month minus spot)/spot. That signal issued a MAJOR short signal after the roll earlier this week but after today is back closer to average.
I'm going to continue using these systems. If we are now in 2004-07, then we will see periodic spikes in spot of 30% and front month of 20-30%. Those will be shorting opportunities. We may also see selective shorting opportunities after the futures contracts roll. But the days of easy money are over, my friend.