NEW YORK ( TheStreet) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog, anticipating which ETFs will be in play next.

In the following three blogs from the past week Don commented on the trends that are working so far this year, the balanced approach of the SPDR S&P Retail ETF and his ETF Oscar winner.

Three Trends That Are Working for ETFs

Posted 03/10/2010 1:15 p.m. EST

A helpful approach is to look at what's been working in 2010, and fundamentally assess whether these trends will continue. Here are three themes that stand out.

Biotech Bullishness

Bidding has helped to buoy biotech as companies with cash look to buy earnings. OSI Pharmaceuticals ( OSIP) and Millipore ( MIL) have been sector standouts, helping to push biotech ETFs higher.

In a sector characterized by homeruns and strikeouts, ETFs offer a way to gain exposure while mitigating single-security risk. While Human Genome Sciences ( HGSI) now trades over $30, a more than 5,000% increase from the same time last year, a late-stage failure for Medivation's (MDVN) Alzheimer's drug set that stock back 65% in a single session last week.

How to play: First Trust NYSE Arca Biotech Index ( FBT) uses an equal-weight methodology to give investors exposure to 20 firms that represent a cross section of the sector. Unlike iShares Nasdaq Biotechnology ( IBB), which concentrates assets in industry giants and top holdings, FBT offers a more balanced viewpoint.

It also doesn't hurt that FBT's portfolio contains both OSI Pharmaceuticals and Millipore.

Regional Banks Roar

As the Volcker rule proposal signals a change of tone in Washington, ETFs focused on regional banks, such as iShares Dow Jones U.S. Regional Banks ( IAT) and the regional-bank-heavy SPDR KBW Bank ( KBE), have outperformed big-bank funds.

While the Volcker proposal will likely continue to meet resistance, its introduction marks a shift from the big-bank bailouts that put giants such as Goldman Sachs ( GS) and JPMorgan Chase ( JPM) in the spotlight.

How to play: As the government sets it sights on financial reform, KBE and IAT could continue to outperform. Both ETFs are strong, liquid picks for regional banking exposure.

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Indefatigable Japan

Despite the ongoing problems at top-holding Toyota ( TM), it seems like nothing can derail the iShares MSCI Japan Index ( EWJ).

A stronger yen is lifting the returns of the equity ETFs, and EWJ is up 4.41% year-to-date. Investors are anticipating an increase in exports to China, Japan's second-largest export market after the U.S., which would boost profits for Japan's manufacturers.

Political changes have also fueled hope for this previously stagnant economy. In August 2009, the Democratic Party of Japan won a landslide victory over the entrenched Liberal Democratic Party. Reform could help to fuel growth in the months ahead.

How to play: EWJ is a direct way to bet on Japanese firms, but ETF investors need to remember that this fund is highly influenced by currency changes. Since EWJ does not hedge its currency exposure, shares of this fund represent an unhedged investment in overseas securities.

When the dollar is appreciating against the yen, this fund gets a boost, but currency cuts both ways. Investors using EWJ to bet on Japan will want to have a full understanding of the currency situation.


The Best Big-Picture Retail ETF

Posted 03/10/2010 8:54 a.m. EST

Earnings reports from specialty retailers keep pushing the SPDR S&P Retail ( XRT) higher , and sector sentiment should continue to improve with holdings such as J. Crew ( JCG) reporting better-than-expected earnings.

The company released its earnings after the bell yesterday, beating analysts' expectations. Lean inventories helped this retailer report a quarterly profit of 61 cents a share, way ahead of Wall Street's consensus at 46 cents per share and a sharp contrast to last year's loss of 22 cents a share.

Another XRT holding, American Eagle Outfitters ( AEO), reported adjusted fourth-quarter earnings of 33 cents per share, just meeting consensus, but the big news was that the company will close its Martin + Osa concept stores, which will slim down inventory, and refocusing on its core business.

While writing about specific holdings is certainly instructive in understanding the movement of an ETF, especially those that are top-heavy, when focusing on funds, you must view the holdings as a group. Determine the scope. See what kind of picture they paint. Does the strategy make sense?

Successful ETFs (balanced, liquid funds that closely track their underlying values) don't hinge on the performance of an individual component; they capture the movement of a sector.

In the case of XRT, its weighting methodology keeps any one stock from influencing the performance of the fund. To put this into perspective, consider this fact: Top RTH holding Target ( TGT) makes up just 1.64% of the fund's total portfolio.

J. Crew makes up 1.51% and American Eagle 1.49% of XRT. To say that either one of these stocks will be responsible for the success or failure of XRT would be ridiculous.

I picked XRT for just that reason: Its well-balanced portfolio will give investors exposure to a sector that has been outperforming, while minimizing exposure to the inevitable few bad apples.

XRT's modified market-cap design allows for this fund to take the temperature of the retail sector, not just let you know how Wal-Mart's ( WMT) doing on any given day.

I've been bullish on the retailers in this fund because many of them offer cost-conscious alternatives to pricier brands. I believe that's the world in which we live. Case in point: As the market floundered in its darkest days, President Obama's daughters showed up to the inauguration in J. Crew, not an uber-expensive custom designer.

Many of the companies in XRT's portfolio have been effective at cutting costs and raising dividends. I believe that innovative new marketing methods will continue to lift the retail sector as the market improves.

Viewing the world through an ETF lens means having to look at the big picture, not calling red or black. XRT is my pick for retail because its well-balanced structure helps to maximize exposure while minimizing risk. In a marketplace where so much is uncertain, you can't ask for anything more.


The ETF Oscar Goes to ...

Posted 03/08/2010 08:01 a.m. EST

Like an award-winning movie, the successful release of an exchange-traded fund is a combination of innovative strategy, good timing and dumb luck.

Watching the Oscars Sunday night after having read Mark Harris' excellent story about Oscar strategy in New York magazine last month, I was reminded once again of the exciting and often surprising process of watching a newly-released ETF succeed or fail in the open marketplace.

Whether an ETF is an indie-breakout or a big budget premiere, sometimes things go right, sometimes things go wrong, but you never really know until the rubber hits the road. The real measure of a product's success is its reception: No matter what an ETF is about, it's only a hit if people show up.

It may be only early March, but a raft of new ETF products already have been released in 2010 with varying success. Looking back at the beginning of 2010, however, there is already one product that stands out when judged by factors like timeliness, strategy and. most importantly, reception.

Thus far, the ETF Oscar for best new product of 2010 goes to: ETF Securities' ETFS Physical Platinum Shares ( PPLT).

Launched on Jan. 8, PPLT already has amassed more than $430 million in assets, helping to make ETF Securities' fledgling U.S. ETF operation the 15th-largest ETF issuer when measured by total assets.

This global ETF brand was the first to introduce physically-backed gold ETFs in Australia and London in 2003.

Physically-backed, bullion-based products like PPLT and SPDR Gold Shares ( GLD) have transformed the way that U.S. investors access precious metals, transforming a small segment of the market into an asset class.

PPLT offers investors fractional exposure to a physical stockpile of platinum. The performance of the fund is determined by the demand for and price of physical platinum.

PPLT's launch couldn't have been more perfectly timed -- a result of good luck and market conditions. ETF Securities filed for PPLT and the accompanying ETFS Physical Palladium Shares ( PALL) back in early 2009, first introducing the idea of a physically-backed platinum product to U.S. investors.

Already familiar with products like GLD and iShares Silver ( SLV), ETF investors were ready to embrace a new way to access an extraordinarily expensive asset. Having already introduced two successful physically backed products into the U.S marketplace to compete with already-entrenched competitors, ETF Securities was ready to make its name as a first-mover in the platinum space.

As a new participant in the U.S. ETF marketplace, ETF Securities had to rely on strategy -- rather than notoriety -- when introducing PALL and PPLT. They stepped into a gap in the ETF industry and presented a new investment vehicle to an equity-wary investor pool.

In his article about the process of Oscar campaigning, Harris notes "there is no war room, per se, but there are early front-runners that fade, grassroots insurgencies, even primaries. Ultimately, most of the nominees emerge from a combination of good planning, good movies, and good luck."

PPLT has been able to capitalize on a booming segment of the ETF industry, an exciting new strategy, and a moment in market history.

While other ETFs will ultimately enter the exchange-traded space in 2010 and compete for the attention of investors, PPLT has already made its mark and this product won't be easily forgotten in the months ahead.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion was long PowerShares DB U.S. Dollar Index Bullish and ETF Securities' ETFS Physical Platinum Shares.

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.