I believe the FED deliberately introduced uncertainty to monetary policy in May's meeting to "take away the punch bowl" in some markets that were showing froth. Having had the desired effect, I believe that tomorrow's policy announcement would be all about reassuring the markets.
The more appropriate question may then be, to what level would VIX fall if a drop is the likely outcome?
For those of you that have been keeping up with my blog posts, I have a methodology that calculates a "fair value" of VIX. 1) I estimate the appropriate Implied Volatility level based on realized volatility of the SPY, looking at both EGARCH values from http://vlab.stern.nyu.edu/analysis/VOL.SPX:IND-R.EGARCH or calculating my own realized volatility value. 2) I refer to my median VIX analysis to determine the appropriate VIX median value ranges depending on whether SPY is in an uptrend or downtrend.
If VIX were to fall to 14.5-15.0, then VXX could fall to 18.8 - 19.45 based on an average 15% premium VIX July futures would trade over spot VIX with 20 trading days to go before July expiration.
