Big Volume in US Dollar ETF, March 2011 Call Options ($UUP), Get Ready For November Catalysts

The US Dollar Bullish ETF ($UUP) and its March 2011 call options saw big volume yesterday. UUP closed up 0.13 or 0.57% at 22.65 on 15.43 million shares (average of 3.76M) and a total of 227.57K options traded (average of 21.49K). UUP hasn't seen this much volume since May. UUP is testing the 2008 and 2010 lows which could explain the upside positioning, whether speculative or hedging.

Check out the two block trades: 99,000 UUP March 24 Calls traded at 0.34 (6,586 open interest) and 54,000 UUP March 23 Calls traded at 0.61 (48,617 open interest). The big volume was on the PHLX. It was a vertical call ratio spread according to OptionMonster. UUP was also on my ISE widget with 4,823 calls opened versus 253 puts opened.

UUP tested the November/December 2009 lows, reversed course and perhaps squeezed shorts on an oversold condition (relative strength index snapped back and MACD crossed signal line). You can see that UUP is still in a viscous descending channel. It could try to test the 50 day moving average and that downtrend line but the MACD (momentum) is still below the center-line and not diverging with price action. So there are mixed directional signals. If you have an indicator that trumps all please share below. Alert by DailyFX: EURUSD: Short Entered on Diamond Top Break.

There needs to be a BIG catalyst for the Dollar, equities and commodities. November will seal the deal with Fed QE2 and the elections. Key areas to watch on the UUP chart are the MACD center-line, new RSI highs > 50, 50DMA resistance and descending channel resistance (downtrend).


$USD - US Dollar Index (10/27/2010)

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