Before we get to this week’s market commentary, I want you to ring the register on your Consumer Staples Select Sector SPDR ETF March $50 calls (XLP160318C00050000) that closed last week at $1.22. Subscribers that heeded my recommendation and added the calls just two weeks ago already booked a 65% profit when we sold half the position last week, and today’s move will close out the position with a near 70% return on what’s left. The blended return will be around 67% over the last two weeks.

Stepping back, we closed last week with pretty solid gains across the board in most of our ETF positions. Of our seven open positions, five are nicely profitable, one is hovering just below breakeven and one is modestly in the red.

The position that is hovering around breakeven is our PowerShares DB US Dollar Bullish ETF ([stock_quote symbol=”UUP”]), and that reflects the growing view the Fed will not boost interest rates at its March meeting as it takes the temperature of the slowing economy.

There are two reasons why, however, I see more upside ahead with our UUP shares. First, last week’s Consumer Price Index from the Department of Labor showed that rising rents, medical costs and wages lifted consumer inflation at the fastest rate in the last four-and-a-half years. Year over year, excluding food and energy prices, the Consumer Price Index rose 2.2%. Rising rents reflect the preference to rent and not own housing, while rising medical costs are due to the latest rounds of price increases. Thank you, “Affordable” Care Act.

I point all of this out for the following reasons:

1. Inflation is part of the Fed’s dual mandate when it examines the impact of monetary policy on the economy and its target is 2 percent.
2. Rising costs, such as benefits and wages, are likely to result in price increases as companies look to preserve margins and profits.

In other words, even though the economy’s current glide path is a slower one, at a minimum, the Fed is likely once again to jawbone the market with talk of being confident enough to raise interest rates before too long. That will drive demand for the dollar, particularly given this morning’s February flash PMI report for the euro zone, which hit its lowest level in more than a year. New order growth continued to slow and flash manufacturing PMI came in at a reading of 51, just above the expansion/contraction line of 50.

To me, this report supports the growing view the European Central Bank (ECB) will indeed add to its monetary policy efforts to stimulate the flailing euro zone come March. Such actions will devalue the euro relative to the U.S. dollar to make euro zone goods and services more competitive on the global stage.

In either case, the probability of the U.S. dollar heading higher is high. As such, we are going to continue our “Hold” rating on UUP shares. For further returns, we are adding a “Buy” rating for the UUP June $25 calls (UUP160617C00025000) that last traded at $0.67 and expire on June 17. There is ample liquidity in these calls and the timing ensures we will capture any moves by the ECB, as well as jawboning by the Fed. Being mindful of the volatile environment we’ve been living in, set a protective stop for this new position at $0.40.

The Mobile World Congress — why should you care?

Once a hotbed of new mobile phone and smartphone models for the coming year, the Mobile World Congress event should still result in a number of technology and device announcements that make it worth paying attention to as part of our Connected Society and Disruptive Technology investing themes. Also, Facebook ([stock_quote symbol=”FB”]) has announced it will add another layer of monetization as it expands advertising past its Facebook and Instagram properties to include Messenger. These efforts have been wildly successful and this bodes very well for revenue and profits at Facebook.

There are two ETFs with significant exposure to Facebook — First Trust Dow Jones Internet Index Fund ([stock_quote symbol=”FDN”]) and the Technology Select Sector SPDR Fund ([stock_quote symbol=”XLK”]). Between the two, call options for XLK are far more liquid, plus its holdings include Apple ([stock_quote symbol=”AAPL”]), which is slated for several announcements mid-March, as well as other technology heavyweights like Alphabet ([stock_quote symbol=”GOOGL”]), among its 75 holdings.

Let’s add the XLK shares as part of our Connected Society investing theme and, for greater returns, buy the XLK March $42 calls (XLK160318C00042000) that last traded at $0.42 and expire March 18. Be sure to set a $0.20 protective stop loss with this option trade.