Global ETFs Offer Short-Term Upside

The U.S. markets are perking up nicely this December, but the best opportunities in early 2009 may be overseas, Down Under, and south of the border. As it turns out, other world markets are recovering more quickly than the NYSE or Nasdaq and are opening up good trades in the country-based exchange traded funds.

Different bull themes are emerging in bourses around the globe. Some are benefiting from the weaker dollar, while others are moving higher because locally owned energy resources are stabilizing after the crude oil crash. A third group held up better than the economic giants in the selloff, allowing them to recover with less overhead supply.

However, major challenges lie ahead for all world markets, despite the most recent uptick. We don't know if government-sponsored stimulus packages now in place in dozens of countries will have the desired effect of stabilizing growth and reopening credit lines. In fact, it might take years to answer that deceptively simple question.

We also can't predict how the law of unintended consequences will come into play, although it's likely to be a huge factor over the next three to five years. Massive liquidity dumped into the world economic system could play havoc with the inflation-deflation axis and trigger disruptions that do significant and lasting damage.

But for now, there's money to be made playing these exchange-traded funds and riding them to whatever price levels finally trigger renewed selling pressure. That day might come soon, or it may be postponed well into 2009. So, while we keep one foot near the exit door, let's look at four country funds that show potential upside in the weeks ahead.

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iShares China 25 eSignal

The Asian giant is slowly waking up from the dead. The iShares FTSE/Xinhua China 25 Index Fund (FXI - commentary - Cramer's Take) sold off from an historic high at $72 in late 2007, falling all the way to $19 in late October of this year. The fund then bounced off the deep low before stalling out near $28 in November and rolling over once again.

Unlike many other world markets, this one posted a higher low rather than a lower low during the November test. This resilience yielded a strong recovery that lifted price over the 50-day moving average nearly two weeks ago. The issue has been consolidating its gains nicely since that time and looks ready to start a rally into the lower $40s.

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At the time of publication, Farley had no positions in stocks mentioned, although holdings can change at any time.

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