Five ETFs to Watch This Week

NEW YORK ( TheStreet) -- Financials, technology and the growth of emerging markets will continue to dominate the thoughts of investors in the short trading week ahead. ETF investors should keep an eye to earnings, liquidity and long-term implications as they assess their portfolios this week.

Dow Jones U.S. Financial Sector Index Fund ( IYF)

Investors have had a long weekend to digest JPMorgan Chase's ( JPM) quarterly results and reflect on the impact that President Obama's proposed bank tax would have on the country's largest financial institutions.

This week, all eyes will return to the financial sector, as Citigroup ( C), Bank of America ( BAC), Morgan Stanley ( MS), Bank of New York Mellon ( BK) and Goldman Sachs ( GS) issue quarterly results.

In the wake of the financial crisis, large financial institutions have made a strong comeback, and investors should see more of the same in the shortened week ahead. Legislation to punish these banking behemoths will be difficult to craft, but it could crimp profits in the long term. In the meantime, IYF is a good way to catch the short-term upswing.

First Trust Dow Jones Internet Index Fund ( FDN)

Google ( GOOG) reports after the close on Thursday, and the firm's results will sway funds like FDN, which is heavily weighted in Google.

Although FDN has sunk slightly so far this year, this fund is up more than 83% for the one-year period ending Jan. 15. Google makes up nearly 10% of FDN, and if this Internet giant is able to stomp estimates, investors in FDN will benefit from the upswing.

Online advertising, which is at the heart of Google's revenue plan, has begun to gain traction. While other Google news -- everything from Chinese protestors to a new smartphone -- has captivated consumers in recent weeks, earnings numbers should help to determine a true direction for this stock.

iShares FTSE/Xinhua China 25 Index Fund ( FXI)

Investors will get more clues about the Chinese economy on Wednesday, when China releases its GDP, CPI and industrial production.

Early last week strong export and import numbers boosted China funds like FXI. But, as investors watched China's central bank take additional steps to rein in bank lending, a selloff indicated that confidence in China's growth may be waning.

The large state-owned companies at the top of FXI's roster stand to be impacted the most by government lending policies. More than 44% of FXI's underlying portfolio is dedicated to China's financial sector.

Now may be a good time for China investors to switch from large-cap funds like FXI to small-cap picks like the Claymore/AlphaShares China Small Cap ETF ( HAO). By investing in funds less likely to be impacted by the actions of state-owned firms and government regulation, investors can temper the impact that data will have on their holdings.

iShares Dow Jones US Oil & Gas Exploration Index ( IEO)

As investors await Tuesday's presentation from Devon Energy ( DVN), IEO may be a good barometer of confidence in the exploration and production of oil and natural gas.

In the wake of Exxon Mobil's ( XOM) acquisition of XTO ( XTO), analysts have speculated that Devon may be a good candidate for merger, once its sheds offshore assets. Short term success will be overshadowed by government initiatives to implement green energy solutions, so any bet on this sector should be tempered by reform expectations.

Devon's current access to cheap and relatively easy to access sources of natural gas will give this company an edge in the short term. This week, as Devon Energy presents at the Independent Petroleum Association confab and Progress Energy ( PGN) updates guidance, this will be a sector to watch.

Consumer Staples SPDR ( XLP)

Tuesday marks the deadline for Kraft ( KFT), which makes up 3.84% of XLP, to raise its bid for Cadbury ( CBY). Kraft and Cadbury closed a friendly deal Tuesday.

At the time of publication, Dion owned HAO and FDN.

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.

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