What if the U.S. dollar has hit a floor? What if it doesn't continue to weaken?

Consider action in the PowerShares DB Dollar Bullish Fund (UUP). This fund recently rose 2% over 5 consecutive trading days on record breaking volume.

Here's what happened from 10/22-10/28:

PowerShares DB Dollar Bullish Trading Volume (UUP)
     
  

28-Oct

 

6,781,100

  

27-Oct

 

5,984,700

  

26-Oct

 

6,861,400

  

23-Oct

 

3,610,500

  

22-Oct

 

2,454,600

A 2% rise in a currency may not sound like much. However, when it comes on exceptionally high volume (a la strong conviction)... when it happens on a daily basis... it's possible that we can see snowball selling of riskier assets.

What are those risky assets? Review my feature, When the U.S. Dollar Jumps... Some ETFs Get Hit The Hardest.

In brief, I highlighted why Market Vectors Gold Miners (GDX) was particularly prone to a sell-off. I also discussed how the SPDR Select Materials (XLB) sector and the KBW Bank Fund (KBE) had been cruising for a bruising.

While there is no telling how long near-term intrigue in the U.S. dollar will last, those who fervently believe in the intermediate-trend of U.S. dollar devaluation may have easy pickings in the near future. In my article, The International ETFs That Bulls Will Buy When The Pullback Ends, I explain why Australia (EWA), Brazil (EWZ) and Gold Miners (GDX) could be in the driver's seat.

Of course, the dollar isn't just playing games. For the first time since April, the PowerShares Dollar Bullish Fund (UUP) is actually threatening to climb above a 50-day, short-term trendline.

 UUP

And as if that weren't the only threat, the CBOE Volatility Index (^VIX) is perilously close to climbing above a long-term trendline... the 200-day moving average. And that hasn't happened since March.

VIX

A near-term uptrend for the U.S. dollar? A long-term uptrend for volatility? These are not desirable circumstances for the present tense.

That said, investors should keep their wits about them. The likelihood of intermediate-term strength in the U.S. dollar seems far-fetched... when both the Fed and the U.S. government are working pretty hard to keep the greenback weak. What's more, money managers everywhere are still looking for entry points to put money to work for clients who want back in. And last but not least, according to Stock Trader's Almanac, November 1 begins the best 3-month period for historical growth in the stock market.

Time will tell. (That... and the dollar!)

If you'd like to learn more about ETF investing... then tune into In the Money With Gary Gordon. You can listen to the show LIVE, via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log (blog) that makes the world of ETFs easier to understand. The content does not represent investment advice, nor are the securities discussed suitable for every investor. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

You can view Gary's daily market commentary at www.ETFexpert.com. You can also email him directly at garygordon@mypacificpark.com.