Despite the bounce the last couple days, the dollar remains in a steep descending channel. The bullish dollar ETF (UUP) shows a slightly different picture given the inability of Deutsche Bank to exactly replicate the returns of the DXY index. The UUP looks to have found support at last year's lows and has seen a large uptick in volume in the current bounce. The ETF can give us extra clues by watching the traded volume.

Yet, the DXY index does not look nearly as bullish and remains within the confines of a descending channel. Last year's lows, pre-Lehman panic and unprecedented liquidity increases, are still quite a bit lower. The volume in the UUP leads me to believe that the dollar may stabilize for a short time before heading back lower. The dollar's bounce may have been partly because of the much-anticipated advance GDP number announced this morning. The US economy grew at a 3.5% annual rate in the third quarter on the back of government incentives fueling a 3.4% rise in consumer spending.

I remain confident in the dollar short trade and believe ETF traders will find some pain rather soon after trying to catch a falling knife.