Volatility futures across all months have been back on the decline at a fairly even pace since the spike in mid-April, as can be seen below (all charts from the VIX Futures Data page)
You can see that the overall spread and spacing between month 1 and month 7 has stayed pretty constant during this time, making for a consistent contango term structure.
You may also notice that the lines are more compressed during this time than they have been in previous months. This compression represents a flatter term structure, which can be specifically measured (using calculation of ln(M7/M1)) and plotted on the graph below.
It's another way of looking at how the slope of the term structure curve changes over time. The previous two graphs are on the same timeframe so you can directly compare what the slope looks like on days with a wide separation vs days with a narrow separation. For the past two weeks the slope of the term structure has stayed fairly constant in a pretty weak contango, with readings between 0.2 and 0.25.
I made a point about the flattening of the term structure last Wednesday as the slope reached 0.19 and the VXX Spike Risk gauge hit 5.8. The following day (May 2nd) the markets rallied and the term structure steepened back up, staying above the 0.20 mark which I find to be critical to maintain to keep inverse VIX products (XIV & ZIV) moving upwards.
So where does that leave us going forward? To answer that we move on to the Daily Forecast page.
Looking at the recent VXX Bias values, the time to look at going long XIV was when the VXX gauge crossed from positive to negative bias on 4/17.
However, the value on the VXX Spike Risk gauge for the same day showed that the risk was a 7.3 (out of 10), indicating that VXX was very likely to see more upside:
As I noted in my recent post on using the forecast gauges, the bias is the best predictor for long term price movement while the spike risk is better for price in the next couple of days. So according to the model, the best play was look to get long XIV was on 4/17 while VXX spiked (XIV dropped). Although because the risk gauge was elevated you want to manage that risk through either VXX call options or a smaller position until that risk gauge fell back below 5 (on 4/23). Note: Had the VXX Bias gauge turned back positive for the 4/18 forecast I'd look to exit XIV promptly.
As of today the bias remains negative for VXX so the best play is still long XIV / short VXX. The roll yield remains small, however, and the spike risk is a moderate 4.6. This is still reason for caution, and if you're not a position here already it's probably not the best time to jump in.
In terms of further downside for VXX over the next week, we're not yet in the basement as VIX could still push on down towards 3-month historical/actual volatility (HV63) which sits at 11.60, near the March VIX lows.
Looking at the ZIV forecast you can see that the bias remains positive although it appears that it could be slowing. I think this is another instance of something that is correct to stay in if you're in it, but not a great time to enter (also see the 2 year view of the ZIV bias if you haven't already).