ETF Expert

Over the last 6 weeks, downward momentum has accelerated, volatility has increased and bullishness has disappeared. No doubt about it… this is a custom-made environment for extreme bearishness.

However, doom-n-gloomers may want to tame their own irrational exuberance. The vast majority of stock markets around the world aren’t down 20% in their local currencies, meaning that most stock markets… so far… are only ”correcting.”

That said, with the euro losing 17% to the U.S. dollar in 2010 alone, it has been disastrous to own European Stock ETFs domestically. China’s tightening of credit has kept most Emerging Market ETFs from gaining any positive momentum. Meanwhile, the current prices on most foreign and U.S. benchmarks have fallen below respective 200-Day moving averages.

So what should you do if you’ve hit stop-limit orders and have a greater level of cash? Should you buy Income ETFs? Should you be a bold contrarian by catching a falling knife? Or should you sit tight?

There’s nothing wrong with holding a bit more cash than usual, to keep your powder dry. And there are a wide variety of income ETFs that I often advocate, including JP Morgan Alerian (AMJ), Templeton Global Income (GIM) as well as iShares High Yield (HYG).

However, if you’re determined to buy stock assets with cash, you might want to consider those that have managed to maintain their uptrends. Here are 3 to think about:

1. PowerShares Dynamic Food And Beverage (PBJ). This exchange-traded fund holds 30 companies from “Fast Food Nation” a la McDonald’s and Burger King… all the way through “Mmmm Mmmm Good” a la Campbell’s Soup and Whole Foods Market.

2. iShares Health Care Providers (IHF). I don’t know if anyone should get too excited here. Since health care legislation passed, the collective ETF power of 50 providers from United Health to Wellpoint to Aetna has been decidedly weak. Yet there’s no exposure to the euro, the fund P/E is reasonable and IHF is still in a technical uptrend.

3. First Trust Internet (FDN). It’s the ultimate in info-tech, from Google to e-Bay to Salesforce.com. It’s going to get whacked when tech takes it on the chin. Moreover, a price-to-sales ratio of 3 is hardly a bargain. Yet this may be the best ”internet tracking ETF” for believers.

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