5 ETFs to Watch This Week

ETF investors will have their hands full in the energy, currency and industrial commodity markets.
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NEW YORK (TheStreet) -- ETF investors in the energy space will be looking for safe havens from the BP (DBO) - Get Report fallout, while currency and industrial commodity investors will be figuring out what to do about the deterioriating situation in Europe.

United States Oil Fund (USO) - Get Report

Investors are looking for bargains in the energy space in the wake of the BP disaster, but as I pointed out last week,

oil prices were a greater factor in the decline of energy ETFs

.

Oil bulls received a bit of good news last week as inventories of oil and gasoline declined far more than expected, but current inventory levels are still above average. Investors looking to catch a bounce in oil service ETFs such as

iShares Dow Jones U.S. Oil Equipment

(IEZ) - Get Report

(IEZ) will need a rally in crude.

The

PowerShares DB Crude Oil

(DBO) - Get Report

and

U.S. 12 Month Oil

(USL) - Get Report

are superior choices for playing oil here.

Last week, USO made a "death cross" as its 50-day moving average fell below its 200-day moving average. Neither DBO, USL, nor the price of crude oil itself have made a similar cross, which shows how contango has cost USO investors money.

Currencyshares Euro

(FXE) - Get Report

The euro quiets down for a few days and lulls everyone into a sense of complacency before it storms back, either testing new lows or staging a rally. On Friday, it headed for new lows as a raft of bad news came from the continent. Romania had a failed bond auction, Hungary is becoming the next country to watch for sovereign debt problems and Societe Generale was rumored to have derivative losses.

All of this combined to slam

iShares MSCI Austria

(EWO) - Get Report

, whose banking system has the most exposure to Eastern Europe.

Shares of this ETF replaced

iShares MSCI Spain

(EWP) - Get Report

and

iShares MSCI Italy

(EWI) - Get Report

as the biggest loser in the eurozone. Shares of

Market Vectors Poland

(PLND)

were down even more, as the zloty tumbled more than other Eastern European currencies.

Investors looking for the other side of this trade can try, in order of increasing aggressiveness:

PowerShares DB U.S. Dollar Index Bullish Fund

(UUP) - Get Report

,

ProShares UltraShort Euro

(EUO) - Get Report

and

ProShares UltraShort MSCI Europe

(EPV) - Get Report

.

United States Natural Gas

(UNG) - Get Report

Although UNG is a flawed product and does not accurately track natural gas prices, it gets close, and its rebound from below $7 to over $8 correlates to a rebound in natural gas prices that have the fuel above its 200-day moving average for the first time since March.

This may be a seasonal move as electricity demand picks up during the summer and prices for natural gas tend to rise in summer and winter, but there are also some favorable trends. At the top is the BP disaster, which highlights the environmental risk of deepwater drilling.

Natural gas appeared to be the best fuel politically because it was cheap and abundant, with enough production to meet almost all of the domestic demand. In various energy and climate change bills, however, it seemed that backers of coal, nuclear and other energy sources were more nimble lobbyists than the natural gas industry.

In the past year, the best performing play on natural gas has been the most conservative, the

JP Morgan Alerian MLP ETN

(AMJ) - Get Report

, which has exposure to companies that produce, transport and store natural gas.

A better bet to play for a rebound in natural gas prices is

First Trust ISE Revere Natural Gas

(FCG) - Get Report

. It holds the big names in natural gas exploration and production, such as

Chesapeake

(CHK) - Get Report

,

Cimarex

(XEC) - Get Report

, and

EOG Resources

(EOG) - Get Report

.

Powershares DB Base Metals Fund

(DBB) - Get Report

Industrial commodities are under heavy pressure from a stronger U.S. dollar, concern about the effect of Europe's austerity packages and China's economic policies designed to slow the property sector. In Friday's sell-off, DBB fell below an area that had proved to be solid support several times in the past year.

Last week, nickel was slammed and

iPath DJ-UBS Nickel ETN

(JJN) - Get Report

sank more than 10%, though it is not part of DBB, which holds futures split evenly between aluminum, copper and zinc.

Except where there is a clear counter-trend, such as may be developing with natural gas, commodities are in a negative trend and the industrial metals are experiencing the most volatility.

Market Vectors Gold Mines

(GDX) - Get Report

The gold miners are an interesting group because they switch between tracking gold and stocks. Much of this year, GDX followed gold, and earlier in 2010 that meant underperformance, but in April and the first part of May, it meant outperformance.

Gold prices have struggled to move higher after setting a new high in May, and while gold did climb on Friday thanks to more concerns about European debt and the euro, the gain was small. Since peaking on May 12,

SPDR Gold Shares

(GLD) - Get Report

is down about 2%, but GDX has lost closer to 8%, roughly in line with the S&P 500. Until gold stages a larger move, up or down, GDX is likely to trend with equities.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion Money Management owns iShares: Comex Gold Trust, Market Vectors Gold Mines.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.