Keep Your Eye on the Volume Surge in the UUP Dollar ETF

Oct 28, 2009: 6:05 PM CST

There’s been talk of the strengthening of the US Dollar Index (or in the FOREX pairs), but here’s something people who only watch the index might be missing – there’s an obvious volume surge in the UUP shares (Dollar Bullish ETF) that is worth a second look.  Let’s see it.

Remember that the US Dollar Index is inversely correlated (trades opposite) the S&P 500 and most Commodities, including Crude Oil and Gold.   These relationships, as well as monthly, weekly, and daily charts, are the focus – along with opportunities for positioning – of my Weekly Inter-market Reports subscription service.

In regard to the UUP – the Bullish US Dollar ETF – we see price in a solid downtrend, but there a few bullish potential reversal factors to consider.

There’s a lengthy positive momentum divergence that has been in place since March 2009 (not shown).  The bullish divergence also shows up on the weekly frame.

This reminds me of a similar structure in the USO and Crude Oil as we turned the corner into 2009, which I discussed in prior reports entitled

Possible Reversal Up in Crude Oil and USO,” and

“Rounded Reversal in Crude Oil.”

The implications for a possible reversal are the same.

Also, there has been a surge in volume into the UUP ETF over the last three days as price has advanced in three solid bullish bars – that’s bullish.

Three bullish bars are not enough to reverse such a powerful downtrend, so the official reversal – if it starts here – will not be confirmed until price rises above the 50 day EMA and then – preferably – the 20 day EMA will cross ‘bullishly’ above the 50 EMA.

A close over $23 per share in the UUP would also be a powerful bullish omen, as price would have cracked above the 50 EMA and a prior resistance price high.

Odds are decent – though of course not guaranteed – that if a reversal is to form, chances are good it could form here.  Otherwise, the sellers will override these bullish signals and the overall downtrend will continue to test the prior lows of 2008 (roughly $71 in the US Dollar Index).

Remember that if the US Dollar Index continues to rise from here, then it would be quite bearish for the S&P 500 (stock market), Crude Oil, and Gold, (and – of course – the Euro).

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

26 Comments

26 Responses to “Keep Your Eye on the Volume Surge in the UUP Dollar ETF”

  1. tgarfield Says:

    What is that MACD setting you use? I use it and have it written above my monitors but I'm on the road for a bit, and I can't remember.

  2. missyotto Says:

    Not Corey, but I think his macd is 3,10,16

  3. terlyn Says:

    Although I think it's time for the dollar to rally, I am guessing the high volume is short covering. But maybe that doesn't matter, as it didn't matter for this stock market rally.

  4. goldsilveralert.com Says:

    Your blog is informative. It gives insight in many ways. People would like to visit your website often. The blog owner has invested good amount of time and research in bringing information for its viewers. There are different articles which gives insight in many different topics. Keep up the good work, increase your viewers and Happy Blogging!

    Your Visitors may also find useful information by visiting our website goldsilveralert.com

    We Provide Tips in MCX Commodities – Gold, Silver, Copper, crude, Zinc Lead, Nickel, Natural Gas, Mentha & Aluminium

    You Would also find Free Trading Levels, Free Reports & Free Charts of MCX Commodities. You will also get tips and information on Globex.

    Service Provided on SMS & Yahoo Messenger
    Visit our website goldsilveralert.com

  5. Bob Says:

    Good post! It's important to step back and take in the broader perspective, and the influence of the USD is arguably the most significant leading macro influence.

    Cheers!

  6. Dan de Man Says:

    As a betting man, I would have to guess double top on gold and oil. Then we make the big money on the down side. Then I go buy new iMacs for my kids and a new car for the wife.

    Those bulls tried to fool us again with a bear trap. LOL

  7. Dan de Man Says:

    Real traders don't use these types of services. They read charts and make their own informed decisions.

  8. Corey Rosenbloom, CMT Says:

    Thanks Dan. I removed the spam comment here.

  9. Corey Rosenbloom, CMT Says:

    I use the 3/10 Oscillator – you can read more about it here:

    http://blog.afraidtotrade.com/how-do-i-create-t

    Thanks Missyotto for the quick response!

  10. Corey Rosenbloom, CMT Says:

    To an extent, probably, in that the sentiment is so bearish on the dollar (people think it is going to collapse) and so any upward move could trigger a short-squeeze. But most traders I suppose don't necessarily short the UUP as buy the UDN which is the Dollar Bearish ETF so not all the volume is short covering necessarily in the UUP above. We're not really seeing the same volume surge in UDN right now.

  11. Corey Rosenbloom, CMT Says:

    Very true! All eyes really are focused on the Dollar and its movements and the implications for a potential trend reversal.

    If the dollar keeps falling, gold, oil, and stocks will bust through overhead resistance and keep rising.

  12. Corey Rosenbloom, CMT Says:

    Haha.

    Anything is possible and it's so difficult to call the turn of such a strong trend in real-time. Sometimes it's best to wait for trendline and moving averages breaks, but when those set-in, and the trend does reverse… that will be a big cross-market shift.

  13. Dan de Man Says:

    YW Corey. And thank you for your wonderful blog. Have a great day!

    Cheers,
    Dan

  14. Dan de Man Says:

    That's very good advice Corey.

    Thank you :o)

  15. Bob Says:

    Good post! It's important to step back and take in the broader perspective, and the influence of the USD is arguably the most significant leading macro influence.

    Cheers!

  16. A Look at Two ETFS: FXE Euro and UDN Bearish Dollar | Afraid to Trade.com Blog Says:

    […] Look at Two ETFS: FXE Euro and UDN Bearish Dollar Oct 29, 2009: 11:08 AM CST // Last night, I took a look at the Bullish US Dollar ETF (symbol UUP) and noted its structure, positive divergences, and moving averages to watch.  This morning, […]

  17. Dan de Man Says:

    As a betting man, I would have to guess double top on gold and oil. Then we make the big money on the down side. Then I go buy new iMacs for my kids and a new car for the wife.

    Those bulls tried to fool us again with a bear trap. LOL

  18. Dan de Man Says:

    Real traders don't use these types of services. They read charts and make their own informed decisions.

  19. Corey Rosenbloom, CMT Says:

    Thanks Dan. I removed the spam comment here.

  20. Corey Rosenbloom, CMT Says:

    I use the 3/10 Oscillator – you can read more about it here:

    http://blog.afraidtotrade.com/how-do-i-create-t

    Thanks Missyotto for the quick response!

  21. Corey Rosenbloom, CMT Says:

    To an extent, probably, in that the sentiment is so bearish on the dollar (people think it is going to collapse) and so any upward move could trigger a short-squeeze. But most traders I suppose don't necessarily short the UUP as buy the UDN which is the Dollar Bearish ETF so not all the volume is short covering necessarily in the UUP above. We're not really seeing the same volume surge in UDN right now.

  22. Corey Rosenbloom, CMT Says:

    Very true! All eyes really are focused on the Dollar and its movements and the implications for a potential trend reversal.

    If the dollar keeps falling, gold, oil, and stocks will bust through overhead resistance and keep rising.

  23. Corey Rosenbloom, CMT Says:

    Haha.

    Anything is possible and it's so difficult to call the turn of such a strong trend in real-time. Sometimes it's best to wait for trendline and moving averages breaks, but when those set-in, and the trend does reverse… that will be a big cross-market shift.

  24. Dan de Man Says:

    YW Corey. And thank you for your wonderful blog. Have a great day!

    Cheers,
    Dan

  25. Dan de Man Says:

    That's very good advice Corey.

    Thank you :o)

  26. A Look at Two ETFs: FXE Euro and UDN Bearish Dollar | Penny Stock Trading System Blog Says:

    […] night, I took a look at the Bullish US Dollar ETF (symbol UUP) and noted its structure, positive divergences, and moving averages to watch.  This morning, […]