Well, at long last, Barclay's has taken the initiative, and recently introduced such a fund. The ticker symbol is VXX, and a link to their information page can be found here.
From what I gather, this fund should track the VIX index reasonably closely. The VIX index tracks the average implied volatility of the 500 stocks that compose the S&P 500.
Implied volatility is one of the factors needed in order to price an option, and tends to rise when there is increasing fear in the market. In other words, anybody selling an option is going to demand higher premiums when there are more risks in a market, just like an insurance company charges higher premiums when they perceive more risk.
Generally, there is a loose inverse correlation between the VIX and the S&P 500. For an interesting chart comparing the two, please refer to my previous blog.
Anyway, the fund is so new, that it is not worth posting a daily chart of it. However, I have constructed a 15-minute chart that compares the fund against the actual index ($VIX):
As you can observe, the fund seems to follow the VIX index reasonably closely. In terms of whether to buy or sell this fund, I would personally trade it just like anything else. This means buying if it is in an uptrend, and shorting if it is in a downtrend.
