Two weeks ago, I warned that the US dollar looked poised for a short-term bounce.

And so far… nothing, zilch, nada. The buck hasn’t done anything.

But I’m not giving up on it yet. The action in the dollar still looks bullish to me for the short term. There’s a lot of energy building up in the chart. Just a little bit of upside action could kick off a strong rally.

Take a look at this chart of the PowerShares DB US Dollar Index Bullish Fund (UUP) – an exchange-traded fund that tracks the action in the US Dollar Index…

The choppy action over the past two months has created an ascending triangle pattern on the UUP chart. Most of the time, this sort of pattern breaks out to the upside. And, if UUP can rally above the early April high at about $23.73 then it ought to make a run towards the next resistance level just below $24.20.

Granted… that’s not much of a move. Nobody is going to get rich playing UUP for a $0.50 gain per share. But that sort of a breakout move in the dollar will likely trigger a short-term pullback in some of the commodities that trade inverse to the buck – like gold and oil.

Now, don’t get me wrong… I am certainly NOT bearish on gold and oil. I think they’ll be trading at much higher prices later this year.

In the short term, though, gold and oil are a bit extended to the upside. They look due for a brief pullback.

A bounce in the buck could be the catalyst for a little profit taking in the commodity sector.

Best regards and good trading,

Jeff Clark

Reader Mailbag

Today, a mixed mailbag…

Your thoughtfulness in trade set-ups is much appreciated. Much like in any sport, you take what the opposing team is giving you to exploit. Standing down is always a fine option. I send this because some folks seem to think the “Clark Machine” should manufacture a trade on a regular basis. Thanks for providing the service!

– Martin

Hi Jeff, Thanks very much for your ongoing market insights. I appreciate your patience before making new trades and your explanations why.

– Kevin

Hi Jeff, I upgraded to “lifetime subscriber” because I really like your way of trading and the philosophy behind it. I wonder how you consider (if at all) the Short Ratio and the Short Interest Ratio data. That is because I heard opinions that, as a contrarian thought, a high Short Interest Ratio (above 5 – i.e. more than five days to cover) can be a signal for high positive move in the stock price.

– Avi

Jeff, 25% in two days on SPY puts. Thanks!

– Gregory

Jeff, as I was reading your Delta Direct 2:15 Update today (April 19), I thought about how much you are like a weatherman. Not only do you analyze the current market condition (is it hot or cool?) but also issue forecasts on how stormy or calm the market soon will be. And you do such a good job at it. Thanks for letting me know when I need an umbrella and when I can soak up the sunshine!

– Douglas

Thank you, as always, for your thoughtful insights. Keep them coming right here.