Is the U.S. Dollar Topped Out?

I am seeing a trade this morning that may very well signal an intermediate term bottom in the S&P 500. This trade comes in the PowerShares DB U.S. Dollar Index ETF (NYSE: UUP), where 103,000 Jan 2011 $24 calls were sold on the bid for $1.03. The volume of this trade exactly matches the open interest on that strike of 104,654; this indicates that a very, very large dollar buyer (probably as a hedge) is now satisfied with the gain and is taking the trade off. This can signal, at least, a sideways dollar index for a while, if not a retracement; both would be positive for the stock market and foreign debt markets.

The PowerShares DB U.S. Dollar Index has risen from $22.00 to $23.69 over the past two months. This price target is the endpoint of an intermediate term reverse head and shoulders pattern in the index, though a much, much longer term double bottom does look to be in place. I would expect the index to be range bound and trade sideways over the next three months.