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ETFs for the Summer

Greece brought European markets to a boil and scorched the euro. With the high level of volatility in the markets, it looks like it will remain hot for a while.
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NEW YORK (TheStreet) -- The heat came early this year, and even the thermometers in the normally cool Berkshires were spiking to 100 degrees in May. Stock markets heated up as well, as Greece brought European markets to a boil and scorched the euro. With Iceland's government warning that the eruption of another volcano, Katla, may be imminent, financial reform about to be voted on in Congress and a high level of volatility in the markets, it looks like it will stay hot for a while.

iPath S&P 500 VIX Short Term Futures ETN (VXX)

Investors were skittish in May. The issues facing Europe and Asia weighed on the minds of people around the globe, causing many to flee the market in fear. This type of scenario proved ideal for exchange-traded products designed to track the VIX. During this past month, VXX saw an impressive rally, breaking through its 50-day moving average before testing its 200-day levels.

With Spain becoming the center of attention in the ongoing euro crisis, it's likely that investors will stay nervous well into the summer. VXX's single-day movements throughout the ordeal will be exciting to watch, and most investors should do just that, since playing with this ETN is likely to burn a hole in your portfolio.

Claymore/AlphaShares Global Solar Energy Index ETF (TAN)

The sun may be out this summer, but it remains unclear whether the solar energy industry will be shining. TAN has tumbled for much of 2010, breaking down through various levels of support. Like many alternative energy sources, solar power companies rely heavily on government subsidies to offset their costs, and they have struggled as nations around the world turn their attention to budget deficits and other issues. Additionally, many of these governments are in the eurozone, and their devalued currency adds insult to injury for the solar industry.

TAN will likely be a fair-weather fund this summer. If global economic crises are worked out effectively, this fund will likely rally. If issues persist, investors can expect pain to ensue.

Claymore/NYSE Arca Airline (FAA)

A possible eruption of another Icelandic volcano is bad news for the airline industry, but a cheaper euro may entice more Americans to travel to Europe for vacation. FAA is one of the better performing ETFs in 2010, beating the S&P 500 Index by about 10%.

iShares MSCI Thailand Investable Market Index Fund (THD)

The ongoing political unrest in Thailand has sent the nation's market on a roller-coaster ride. With red-shirt protesters rising up against government security forces, blood has spilled and lives have been lost. Still, the Thailand ETF held up well relative to other emerging markets and did not suffer as much during the sell-off in May.

Although tensions have cooled, investors playing this nation should continue to keep a close eye on developments from both parties. If more conflict breaks out, investors can expect the fund to struggle.

Global X Silver Miners ETF (SIL)

Silver trades at a discount to gold, based on the historic gold-to-silver ratio. As long as gold prices remain elevated, silver prices should outperform, and if gold experiences another rally, it is likely to perform very well. Combine a strong performance from the metals with a decent performance from the overall stock market, and SIL should be good for at least one big rally this summer.

ProShares UltraShort Euro (EUO)

Europe shuts down in August for continent wide vacations and this summer they might also want to shut down the financial markets. Although the euro is due for a brief rally, it is unlikely to regain its former glory. With Germany banning naked shorting of some financial products and Spain now on the hot seat, chances are the euro will be lower by the end of the summer.

PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ)

Summer is in the air and for many this means replacing thoughts of board meetings and charts with amusement parks and iced coffees. Investors looking for a play on the next few months of relaxation and vacation should look to PEJ.

Boasting names such as







Marriott International





, PEJ is designed to track some of the most recognizable names from across the leisure industry.

The companies that make up PEJ may be all about fun and games, but this fund has enjoyed some serious gains thus far. Year to date, PEJ has gained more than 15%.

SPDR KBW Regional Banking ETF (KRE)

Washington is in the process of putting the final touches on a bill that will usher in the most sweeping financial reform since the Great Depression. Although it is unclear as to when this process will be complete, Rep. Frank (D., Mass.) has insisted that it will be ready for Obama's pen prior to the July 4 recess.

Heading into the summer, I continue to advise investors looking for a play on the banking industry to aim small and choose a regional banking ETF like KRE over a large-cap fund like the iShares Dow Jones

U.S. Financial Sector Index Fund


. The firms which stand to lose the most from Washington's onslaught will ultimately be the Wall Street kings. Therefore, investors should make an effort to avoid institutions like

JP Morgan






Goldman Sachs



Bank of America



Regional banks, on the other hand, have managed to avoid the regulatory heat. There is a strong chance that this trend will continue well into this summer even after the bill gets the final okay from Obama.

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.