ETF Expert

1. Try to find a positive story about the resilience of the U.S. economy. Go ahead… I dare ya! You can "google" until your heart turns blue, but you may come up empty.

Today, CNN Money is reporting that the Fed is having a difficult time deciding what to do next. Should they fight a recession by cutting rates or should they "do nothing" to keep inflation at bay?

The stock market is certainly hoping that the rate cuts are coming. And with the 10-year note’s yield moving from 4.75% to 4% in a little more than a month, you’d think the Fed would take a cue.

In the meantime, it is the government bond buyers who have been making short-term strides. For example, those who allocated to the iShares Lehman 3-7 Year Treasury Bond (IEI) have seen 5% appreciation over the last 5 weeks. That’s on top of the 1% quarterly income stream.

2. Okay… I challenged myself. University of Michigan economists see the U.S. economy rebounding strongly by the middle of 2008. They also believe that the U.S. will not slip into a recession.

How might that play for ETF enthusiasts? Rather nicely. If the Michigan folks are right, many will wonder why they failed to snap up November bargains like the iShares S&P 100 Index (OEF) or the S&P 500 Trust (SPY) while the major indexes were 8%-10% off of their highs.

3. One more for good measure? The Bespoke Investment Group listed ETFs with the most "short interest." Typically, the ETFs and stocks with excessive downside intrigue (a.k.a. "short") are the ones to go up the fastest in a rally.

At the moment, the iShares Biotechnology Index Fund (IBB) and the iShares Basic Materials Index (IYM) have extreme "short interest." They could be set for big gains if the market began trending up.