ETF Expert

For 5 trading days, the U.S. dollar was in strong demand. And for 5 days, stocks and commodities were punished mercilessly.

Consider just how quickly the sentiment shifted towards buying the U.S. dollar. The PowerShares DB Dollar Bullish Fund (UUP) had quietly gone about losing ground on a fairly regular basis for months; the exchange-traded fund typically traded around 2 million shares a day.

Then, the U.S. dollar seemed to have hit a floor. UUP rose 2% in 5 days on exceptionally strong volume… record breaking volume for this ETF.

Here’s what happened in those 5 trading days (through 10/28/09):

A 2% rise in a currency may not sound like much. However, when it comes on record-breaking volume (a la strong conviction)… when it happens on a daily basis… you get a snowball effect of selling 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 was no telling how long near-term intrigue in the U.S. dollar would last, those who fervently believe in the intermediate-trend of U.S. dollar devaluation had easy ETF pickings. In my article, “The International ETFs That Bulls Will Buy When The Pullback Ends,” I explained why Australia (EWA), Brazil (EWZ) and Gold Miners (GDX) would be in the driver’s seat. Indeed… that’s exactly what’s taken place!

Granted, the fact that the U.S. dollar via PowerShares DB Dollar Bullish Fund (UUP) gave back roughly 1% on 10/29… about half of the prior week’s gains… does not mean the pullback is over. Nevertheless, it’s readily apparent how to invest if you are a ”weak dollar believer.”

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.

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