Israel Emerges As A Strong ETF Industry Leader

Tucked away in the heart of the Jewish country is Tali 25, an exchange traded fund (ETF) that is already 8 years old. It was Israel's first fund to market.

Since then, the Israel ETF industry has grown considerably, with a ratio of ETFs to mutual funds of 25%. The ratio in the U.S. is 15%, reports Sarit Menaham for Haaretz.

The most notable aspect of  the Israeli ETF market is the number of ETFs in various indexes.  In the United States and other countries, or or a few ETF providers may have exclusivity over an index. This abundance is great for local investors as it creates competition, and has providers striving to be the best.

American investors seeking to invest in this market can do so with the iShaers MSCI Israel Cap Invest Mkt Index (EIS). This ETF launched on March 28, and is up 10.1% since.

The economy is growing at 5% for the fifth consecutive year, with high-tech companies leading the way. Voice mail technology and other innovations actually have their roots in Israel, who has more listings on NASDAQ than any country aside from the United States and Canada, reports Abraham Rabinovich for The Australian News.

Socialism is a thing of the past, however, the gap between the rich and the poor is one of the deepest among developed nations. Investment in the land of one of the oldest civilizations could prove fruitful for American investors today.

Nasdaq, Dow and ETFs Close at Three-Month Highs

The exchange traded fund (ETF) that tracks the Nasdaq 100 hit a three-month high in trading yesterday after its 10 most-heavily weighted components moved higher. It doesn't seem like it's going to stick if the midday retreat in the markets holds, though.

The PowerShares QQQ (QQQQ) closed Thursday at their highest price since Jan. 14, reports Tomi Kilgore for Thomson Financial.

Apple (AAPL) gave the index a boost after it posted earnings that exceeded expectations at the close of trading on Wednesday. Apple is the index's most heavily-weighted component, with 10.4% of assets. Qualcomm (QCOM) is the third largest component, with 5.7% of assets. The wireless technologies company also had reported stronger than expected earnings.

For the first time since last year, the Dow Jones industrial average scooched above its trend line, the 200-day moving average. It closed at three-month highs after the dollar strengthened and oil prices fell slightly, reports CNN Money.

The DIAMONDS Trust, Series 1 (DIA) closed at their highest point since Jan. 3.

PowerShares Launches Its Actively Managed ETF Line

The long-awaited actively managed exchange traded funds (ETFs) from Invesco PowerShares are here. They're billed as the industry's first three actively managed equity ETFs, and they began trading on the NYSE Arca today.

All of the funds' holdings are to be disclosed daily on the fund's website. They are:

• PowerShares Active Low Duration Fund (PLK): Invests in a portfolio of U.S. government, corporate and agency debt securities. It seeks to outperform the Lehman Brothers 1-3 Year U.S. Treasury Index. The unitary fee will be 0.29%.
• PowerShares Active Mega Cap Fund (PMA): Invests primarily in the equity securities of mega-caps. It seeks to outperform the Russell Top 200 Index. The unitary fee will be 0.75%.
• PowerShares Active AlphaQ Fund (PQY): Invests in a portfolio of about 50 securities listed on the Nasdaq Global Market. It seeks to outperform the Nasdaq 100 Index, and the unitary fee will be 0.75%.
• PowerShares Active Alpha Multi-Cap Fund (PQZ): Invests in about 50 securities selected according to a methodology developed by AER advisors. It seeks to outperform the S&P 500. Its unitary fee will be 0.75%.

The unitary fee is the one fee used to cover expenses incurred in connection with managing the portfolio.

Bear Stearns launched the first actively managed ETF in late March, Bear Stearns Current Yield Fund (YYY).

Feeling Bearish or Bullish? There's An ETF For Every Mood

Last week's stock surge has caused a pullback for some of the leveraged and inverse exchange traded funds (ETFs), the same funds that were earning traders so much money.

David Penn for Trading Markets explains that one of the biggest benefits of a leveraged ETF is that traders do not have to use a margin and still get a 2-for-1 bang for their buck.

Another benefit of a leveraged ETF is that traders can bet against a market without having to sell stocks or ETFs short. Inverse ETF trading is much more simple than taking a bearish position on a sector.

ProShares and Rydex are the primary providers of an extensive line of short and leveraged ETFs.

Take a look at these long/short ETFs that are appearing on investors' radar:

• ProShares UltraShort S&P 500 Fund (SDS)
• ProShares UltraShort QQQ Fund (QID)
• ProShares UltraCap Mid-Cap 400 Fund (MZZ)
• Rydex Inverse 2x S&P 500 (RSW)
• ProShares Ultra S&P (SSO)
• Rydex Inverse 2x Russell 2000 (RRZ)

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

The Newest Members Of PowerShares ETF Family

Exchange traded fund (ETF) provider PowerShares announced two new funds to be listed on NASDAQ. The company states that this will bring the ETF family to more than 110.

The new ETFs are:

• PowerShares NASDAQ NextQ Portfolio (PNXQ)
• PowerShares FTSE NASADQ Small-Cap Portfolio (PQSC)
  

PNXQ is based on the NASDAQ Q-50 Index which tracks the performance of 50 securities that are next in line to replace the securities currently included in the NASDAQ-100 index. PQSC is based on the FTSE NASDAQ Small-Cap index, designed to track the performance of the smallest 10% of companies in the FTSE NASDAQ index universe of listed companies ranked by market capitalization.

Commodities and Short ETFs Tell the First-Quarter Tale

The challenging first quarter has come to a close, and by taking a look at the top performing exchange traded funds (ETFs) for the period, one can get a sense of what the story was. Short ETFs and commodities were the strongest performers, signaling that the markets were tough for investors and they turned to shorts to capitalize, or commodities to hedge rising costs. Meanwhile, many investors shied away from stock ETFs as the market continued its attempt to right itself.

United States Natural Gas (UNG): It's up 33.8% year-to-date, no surprise given that the cost of energy has skyrocketed. It settled at $10.101 per 1,000 cubic feet. Natural gas isn't the same as gasoline used to power cars; it's used residentially, commercially and industrially to heat homes, heat boilers and generate electricity.

Energy is getting more expensive all across the board: the price of a barrel of oil and a gallon of gas hit all-time highs in the first quarter, and relief doesn't appear to be anywhere in sight. Gas prices are expected to continue to rise through the summer, and oil finished the quarter 5.8% higher than it was when it started, reports Adam Schreck for the Associated Press. The direction of oil in the coming months is a matter of debate: some think it will go up, others think it's on a bubble that's bound to burst.

iShares Silver Trust (SLV): Silver has stumbled in the last couple of weeks, but it was one of the brightest spots of the first quarter and is up 16.4% year-to-date. Its rise was part of a broader metals rally (gold was up 9.9%, and base metals were up 15.3%).

Silver benefits from its wide range of applications: it's a major component in developing film, it's an excellent conductor of heat and electricity. It's used in batteries, fuses and contacts. It's a water purifier, and it's used in plenty of jewelry. As the developing world continues to build and grow, demand for silver should continue as it has been.

There's not a lot of silver lying around: the price of it bottomed out in 1980, and much of the existing stockpile was melted down and mining for more slowed.

UltraShort QQQ ProShares (QID): The Nasdaq fell 14.6% in the first quarter, so this fund doubled the inverse and ended up 31.6%. The "UltraShort" in the name means this fund is designed to do twice the opposite of whatever its underlying index does.

Bear market funds were especially popular the first three months of this year, as the markets proved to be finicky and volatile - up high one day, down low the next. For investors with the stomach for the risk, funds like QID kept the returns coming in. At least, as long as the index it was designed to track kept heading south. The potential for gains in these kinds of funds are as great as the potential for losses, and they should be used with caution.

UltraShort FTSE/Xinhua China 25 ProShares (FXP): China was last year's darling, finishing up 2007 up by about 55%. In the first quarter of 2008, it has stumbled. The iShares FTSE/Xinhua China 25 (FXI) is down 20.6% year-to-date, sending the UltraShort fund up 21.6%.

Many believe that China still has room to grow and that it will pick up steam, albeit at a slower pace, this year. One portfolio manager predicts 10% growth in 2008, despite the slowdown. China is sinking money into improving its infrastructure under a five-year plan that's currently in its third year.

The trade surplus in China is set to grow by 22.2% in 2008 while the country's dependence on exports shrinks. Capital investment is rising, as well.

Sign of the Times: UltraShort QQQ ETF Is Top Fund So Far This Year

One sign of the turbulence in our markets: the top performing fund year-to-date is an ultra short.

The ProShares UltraShort QQQ (QID), which holds some of the biggest stocks in the Nasdaq 100, is up 48%, reports David Penn for Trading Markets.

Inverse funds such as these are designed to move in the opposite direction of its underlying index. In the case of QID, the "UltraShort" label means it delivers twice the opposite. These days, when the market seems to be heading down more than it's moving up, short ETFs are popular with investors who want to keep earning, regardless of conditions.

Owning these funds comes with a special set of caveats, however. The market's strong day yesterday is a case in point - if you owned a double short fund, you probably took a bit of a hit.

David Kathman for Morningstar suggests avoiding these risky funds. Many investors are going to do what they want, though, so we suggest that you be aware of exactly what you're getting into and know when to step away.

Leveraged ETFs Can Help You Keep Earning, But Don't Come Up Short

Investors are increasingly less content do just sit there holding cash while the market tumbles, giving short exchange traded funds (ETFs) a measure of popularity. The trend has been especially popular this year as each week seems to bring only more bad news. There's no telling when things will turn around, say investors, so why not turn lemons into lemonade?

ProShares is a leading provider of the short fun. The firm has seen more than $4 billion flow into its offerings this year, one of the largest tallies in the industry, reports Rob Wherry of Smart Money.

As the next few weeks are anticipated to be rough ones for Wall Street, some investors are taking advantage of these vehicles to keep their balances from shrinking. While many want to try and take advantage of these funds for the current market conditions, use them with caution. The risks when there's a turnaround are great.

A few of the short ETFs available are:

• ProShares UltraShort S&P 500 (SDS): up 22% this year. This strategy can help offset risk, keep taxes to a minimum, and protect principal.
• MacroShares Oil Up (UCR): up 55%; may be used as a tax hedge.
• ProShares Short QQQ (PSQ): up 18.8% year-to-date; posts the inverse return on the Nasdaq's 100 largest non-financial stocks.

Options Trading With ETFs Gets Popular In Wacky Markets

Options trading with exchange traded funds(ETFs) has been surging lately, with the most recent spike taking place last month.

It appears people were getting defensive, according to Joe Cusick, market analyst for optionsXpress.

Options are different from simply buying a stock or ETF: they're used to bet on the direction of an ETF or stock's price. There are two types: calls and puts. When you buy a call option, you have the right to buy a stock at the "strike price" before the option's expiration. When you buy a put option, you have the right to sell a stock at the strike price.

Murray Coleman for Seeking Alpha says that the market volatility could be the reason options are suddenly gaining in popularity. They can be a way to hedge your bets against wild swings.

Not all ETFs are a big portion of options trading, and just three ETFs in particular have made up the bulk of the activity:

• The iShares Russell 2000 Index Fund (IWM) has averaged 395,383 daily options volume, a 97% increase from the same period a year ago.
• PowerShares QQQ (QQQQ) averaged 268,000 in options trading per day, up 61% compared with the same time last year.
• SPDRs (SPY) averaged 337,000 daily options trades, up 242%.

Going Ultra Short With ETFs Can Protect In a Down Market

Trading volume has been exploding with short and ultra-short exchange traded funds (ETFs). With the state of the market, it's no surprise: many investors are investing short to ensure their long-term survival while they wait for the rocking ship that is the market to right itself once again.

While going short is risky, doing it with ETFs is safer and easier than doing it with individual stocks.

Richard Shinnick for Seeking Alpha recommends an ultra short basket of ETF focused on precious metals and international bonds. Take the UltraShort QQQ ProShares (QID) which takes a double-short position in the NASDAQ 100 index. Brett Steenbarger for Seeking Alpha calls it a sentiment gauge. Traders seem to become bearish just as markets are making an intermediate-term low.

Short positions in a portfolio are not meant for the long-term and it is important to pay attention when you invest in one of the short or ultra-short ETFs.

Stocks and ETFs Suffer as Indexes Hit 52-Week Lows

The traumatic credit market and increase in home foreclosures are touching down on all areas of the market, including exchange traded funds (ETFs).

Joe Bel Bruno for Associated Press reports that the Dow Jones Industrial dropped 214 points in trading today. The S&P 500 lost 2.20%, while the Nasdaq composite declined 2.30%. The declines sent both the Nasdaq and S&P to 52-week lows.

Credit concerns mounted after Thornburg Mortgage Inc. and Carlyle Group bond fund revealed troubles with investment backed mortgages. The entities failed to make margin calls, which are payments that guarantee much larger debt or investments.

Fourth quarter home foreclosures rose to record levels. Rising defaults have caused lenders to be weary to extend credit, resulting in abnormal credit markets.

Short ETFs Can Help If Handled With Care

In a down market, short exchange traded funds (ETFs) gain popularity, but they need to be used with caution and education.

ProShares UltraShort QQQ (QID) is one of the more popular ETFs of this kind and it tracks the Nasdaq 100, while returning twice its inverse performance. The ETF has $1 billion in assets, and returned 38.8% year-to-date, but it is against a -5.1% return over the past year, says Jesse Emspak for Investor's Business Daily. It's benefited from the decline of the Nasdaq, which is 2.3% below its Jan. 22 low.

Among the strongest of performers is the ProShares UltraShort Semiconductor (SSG) which has given investors 39.5% year-to-date, with a one-year return of 10.4%. The semiconductor industry has been ailing so far this year.

Investors should consider two things when considering short ETFs:

1) Markets tend to go up over the long run, so shorting ETFs are not a long-term investment.

2) There is a strict limit on the gain any short can make. The value of the index should not go below zero.

UltraShorts can make a bad day in a particular sector - this morning's financials, for example - a good one for investors who hold short funds, says Will Swarts for Smart Money. ProShares says their Ultra funds family isn't targeted to the "mom and pop investors."

But for sophisticated investors, ProShares Chief Executive Michael Sapir says they can be a great way to capitalize.

Making sector calls can work, but just be sure you have your exit strategy in place before you get involved. We watch the 200-day moving average and put an 8% stop-loss on each ETF.

January ETF Performance Report

Exchange traded funds (ETFs) and the markets got off to a rocky start in 2008. Already this year, oil has managed to top $100 a barrel, gold set new records and the Federal Reserve cut rates twice. What awaits us the rest of the year?

The major indexes took a beating this month. The Dow Jones industrial average finished down 4.6%. The Nasdaq ended down 9.9%, and the S&P 500 ended down 6.1%. Precious metals were one of the strongest performers this month. Gold was up 11%, while silver was up 14.6%. Agriculture made a strong showing, too, up 12.3%.

Click here to view the full ETF performance report.

Bernanke Wields the Ax Again, Boosting Stocks and ETFs

Once again, the Federal Reserve stepped in and made a half-point rate cut, a move that Wall Street and exchange traded funds (ETFs) apparently liked.

The rate cut didn't come as a complete surprise, as the stock market had been banking on it. They just weren't sure if it would be the half-point cut, or a more cautious quarter-point, reports Madlen Read for the Associated Press. The move today puts the federal funds rate target at 3%, the lowest since June 2005, according to Mark Felsenthal for Reuters.

Once the cut was announced, the stock markets went positive: within minutes of the decision, the Dow Jones industrial average jumped more than 100 points at one point. The S&P 500 and Nasdaq also rose following the report.

It's positive news, but between this latest cut and last week's unexpected three-quarter point cut, will it be enough to rejuvenate the economy? Let's wait and see.

ETF Investors Feel Relief at the End of a Long Week

Investors in stocks and exchange traded funds (ETFs) are probably shouting: "TGIO!" That's "Thank God It's Over." It's been a long week, and today wasn't much better.

This morning, things kicked off looking hopeful. Madlen Read for the Associated Press reports that while the Dow Jones industrial average was up more than 180 points, by afternoon it had slid back to 128. The index finally ended the week down 4%. The S&P 500 had a tough week, too: it was the biggest one-week loss for the index since July 2002, and it's currently at 16-month lows. It ended down 5.4% for the week. The Nasdaq closed the week down 3.6%.

The week started out bad, but then it only continued to get worse as economic and housing reports poured in. Fed Chairman Ben Bernanke's testimony lifted hopes that an economic stimulus package might be what the country needs, but the markets obviously didn't agree today. And the fact that the Fed is concerned made the outlook more grim.

Once again, we will reiterate our sell strategy. It's been bumpy and if you haven't started protecting yourself from yet more losses, it's time to think about doing so.

ETF Investors Want Shelter

Some may wonder if the Fed is in denial: while Bernanke calls for a "slow growth path," Wall Street is calling "recession" and exchange traded fund (ETF) investments and benchmarks are on a steady drop.

As Gary Gordon for ETF Expert points out, the S&P 500 SPDR Trust (SPY) has dropped 9.5% in 12 trading days and is roughly down 15% since the October 9 market top. Ouch!

Other benchmarks and ETFs on the same trend are PowerShares QQQ (QQQQ), iShares Russell 2000 (IWM), Financial Select Sector SPDR (XLF), all down on 20%+ losses from admirable highs. Is it time to grin and bear it?

For those investors who are tired of being dragged by those "wild horses" and are saying "gimme shelter," there are places you don't have to feel like a rolling stone. Gordon looks at these funds and possibilities:

• Global Consumer Staples (KXI)
• Medical Devices (IHI)
• Lehman International Treasuries (BWX)
• Emerging Market Debt (PCY)

Another Rough Day; Save Your Portfolio By Having an ETF Sell Strategy

The markets wrapped up another ugly day for stocks and exchange traded funds (ETFs) this afternoon.

The Dow Jones industrial average fell more than 2%, says Tim Paradis of the Associated Press, and it was down more than 300 points. The Nasdaq fell 1.9% and the S&P 500 dropped 2.9%.

Things today got off to a decent start, but that was quickly unraveled after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered at -20.9 from a revised reading of -1.6 in December.

That news was only followed by more bad news from the homebuilding and real estate sectors: housing starts were down and the building of new homes dropped 8% last month.

Now is a good time to review your sell strategy and make sure that you are sticking to your plan. It can be hard in times like these to keep your emotions from entering into the equation, but it's one of the keys to being a successful investor.

We're living in a different world now than the one we knew in 2007. Many of last year's top performers are suddenly losing ground. If you're holding on to those ETFs and remembering the good times, review them and see if it's time to implement that exit strategy.

What's Your ETF Sell Strategy?

The S&P has not had a 10% correction in many months....until today.

Joe Bel Bruno for the Associated Press reports that persistent fears of a recession, weak retail sales figures and disappointing results from Citigroup sent the markets plunging.

What's an investor to do? Where most well-known market index ETFs such as the Dow, S&P and Nasdaq have dropped more than 10% off of their recent highs, some international and sector-specific ETFs have corrected more than 20%.

This could be a normal correction and the market could catch up to where it left off a few months ago. But what if it doesn't? What if the doom and gloom pasted all over CNBC is correct? Here are three rules that we continue to remind investors about that should keep most of us out of trouble:

1. Maintain an 8% stop-loss on your ETFs.
2. Keep an eye on the trend. If your ETF declines below its 50-day average, that's not a good sign. If the same ETF declines below its 200-day average, sell.
3. Don't chase markets that are too hot. The last time many world markets and industry groups collectively hit news highs was in 2000. You know what happened then. Keep your emotions in check.

Cubes ETF Rebalances, Fund Holders Win

If you've got a piece of the cubes exchange traded funds (ETF), you should be sitting pretty right now. The fund, also known as the PowerShares Nasdaq 100 Trust (QQQQ), has climbed upward since rebalancing on Dec. 14.

Joanna Von Alroth at Investor's Business Daily reports that the fund is up 5% since its annual rebalancing act. It is up 21% year-to-date. The ETF tracks the Nasdaq index, which is made up of the 100 largest and most actively traded non-financial stocks. It's rebalanced every December and inclusion is subject to stringent eligibility requirements including:

• An average daily trading volume of 200,000 shares
• The company must be "seasoned" or listed on a market for at least two years

Once a company is in, it has to continue to work to stay in. Bankruptcy, buyouts and spinoffs can lead to deletion.

Nasdaq ETF Market Is Grabbing More Attention

Nasdaq stock exchange has listed five new exchange traded funds (ETFs) from Barclays Global Advisors. Although it was initially known as the stock exchange for high-tech companies, Nasdaq is the most liquid U.S. market for ETFs. It captured 37.9% of all U.S. ETF volume in October, another record consecutive month, reports Huliq. These ETFs from BGI are the first new funds to list since the launch of the Nasdaq ETF Market in October. The ETFs are:

• iShares FTSE Developed Small-Cap ex-North America Index Fund (IFSM)
• iShares FTSE EPRA/NAREIT Global Real Estate ex-U.S. Index Fund (IFGL)
• iShares FTSE EPRA/NAREIT Asia Index Fund (IFAS)
• iShares FTSE EPRA/NAREIT North America Index Fund (IFNA)
• iShares FTSE EPRA/NAREIT Europe Index Fund (IFEU)

Nasdaq is a leading index calculator, designer and creator of some of the world's most popular ETFs, including PowerShares QQQ (QQQQ).

Nasdaq Drops Anchor in Options Market and Expands Horizons For ETFs

Nasdaq's agreement to purchase the Philadelphia Stock Exchange for $652 million in cash is opening up more competition within the indexing and exchange traded fund (ETF) realm. This gives the biggest U.S. electronic stock market an anchor in the options market, reports Tim Paradis for Associated Press. This is the latest move in the wave of expanding and consolidation of markets, aimed at gaining market share and protecting profits from upstarts. The structure of the Philadelphia exchange will remain the same. Additionally, Nasdaq also launched an ETF market place to keep up with competition as electronic trading takes center stage, and specialists become rare.

ETFs - Pay Attention to That Man Behind the Curtain

Never judge a book by its cover, and the same goes for an exchange traded fund (ETF). Matt Hougan for Seeking Alpha gives five examples.

1. iShares MSCI Pacific ex-Japan Index (EPP) $4.5 billion in assets and Asian exposure? Sounds great. But there isn't a whole lot of Asia in the ETF. 65.4% is in Australian stocks and 1.5% in New Zealand. One third of the fund is Singapore and Hong Kong, so pay attention to Pacific.
2. SPDR S&P Emerging Europe (GUR) Last time we checked, Russia wasn't part of Europe. Nor did it have plans to join the European union. 58% is weighted in Russia -- more than half! Poland, Turkey, Hungary, and the Czech Republic round it out.
3. PowerShares Value Line Timeliness Select Portfolio (PIV) Time is not on its side, with 9.51% gains vs. 13.04% for the index since December 2005. Value is off too, for the index is taking more of a growth slant. There is no low volatility, value screened take on the market here.
4. PowerShares Nasdaq-100 QQQ (QQQQ) The index is skewed, as it appears as a tech proxy. 65% of the fund is tech, however, the rest is healthcare, consumer discretionary and more. The index's social weighting methodology ping-pongs from market cap weighting to price weighting with no true pattern.
5. ProShares ETFs These are great to short the market and offer liquidity and interest income. Compounding is the only issue that remains unclear. The math doesn't work out when "delivering 200% of the daily return of their benchmark indexes." Bottom line: Know what you are buying beforehand.

Hedging with ETFs in a Declining Market

Anytime there's a hiccup in the market, ETF investors look for ways to protect themselves on the downside. Last week, the market volatility index (VIX) closed at 22.96, its highest level since Sept. 17. A similar index, the Nasdaq-100 volatility index (VXN) rose to 25.94, reports Yvonne Ball for The Wall Street Journal. Profit reports and rising oil prices brought concerns about where the economy is headed. The Dow Jones industrial average lost 4.1% for the week, while the S&P 500 fell 3.9%, and the Nasdaq dropped 2.9%.

With the markets looking a little rough lately, many investors are doing heaving trading of November put options on ETFs such as the PowerShares QQQ (QQQQ), which tracks the Nasdaq-100 Index. Another way to take advantage of downturns in the markets is through short and ultrashort ETFs. These ETFs, mainly offered by ProShares, seek to give investors the inverse performance of market benchmarks. They tend to have high expense ratios, so beware that these don't eat up the returns. Also remember that when the market heads up, these ETFs will head down, that's just how they work. The "ultra" provides the double opposite of what the market is doing. One example is the ProShares UltraShort S&P 500 (SDS). Currently, SDS is down 7.4% year-to-date.

As Seed Money Dries Up, New ETFs Might Wither

Hundreds of exchange traded funds (ETFs) might not get a chance to sprout because seed capital for these investments is scarce. Unlike traditional stocks that raise money through initial public offerings (IPOs), ETFs have grown because of the trading floor specialist firms that provide cash to nourish them out of infancy, reports David Hoffman for Investment News. Because of the huge overpopulation of new ETFs and the near extinction of specialists thanks to automated trading, seed capital just isn't there. In turn, this could also cause ETF spreads to widen. Is there a remedy to the problem?

One particular initiative allows ETFs to select multiple liquidity providers. Nasdaq did this earlier this year by launching the Nasdaq ETF Market, which features "designated liquidity providers" that get incentives to support ETFs in their young days of trading.

ETFs and the Market Dip on Bernanke's Gloomy Economy Forecast

The markets, and many exchange traded funds (ETFs), were down today on news from Federal Reserve Chairman Ben Bernanke that the housing market continues to dampen the economy. In a speech Monday night, Bernanke said the effects from this summer's housing market and credit crunch could be felt through the winter, reports Madlen Read for the Associated Press.

The news comes on the heels of oil's record price above $86 a barrel. Rising home mortgage prices combined with higher oil prices could signal real trouble for many U.S. consumers. Oil continued to climb today, with crude futures closing at a new record price of $87.61 per barrel. In addition, the Dow Jones industrial average and the S&P 500 posted their biggest point drops in five weeks yesterday after Citigroup (C) reported a large third-quarter profit decline. On top of that, Wells Fargo (WFC) fell more than 3% after its third-quarter earnings were less than what analysts had expected. In response to today's news, the S&P 500 Index dropped 0.7%, the Nasdaq Index fell 0.6% and the Dow Jones industrial average slid 0.5%.

Is a Cubes Jr. ETF on the Way?

Is a "Cubes Jr." exchange traded fund (ETF) in the making?

The Nasdaq Stock Market started a new index yesterday, the Nasdaq Q-50, which is made up of companies poised to enter into the Nasdaq-100 Index. The stocks within the new index are weighed by market capitalization, reports John Spence for MarketWatch. The launch of the Nasdaq Q-50 Index underscores the efforts of Nasdaq and other exchanges to grab a slice of the growing ETF pie by attracting trading volume and new listings.

The Nasdaq-100 Index is the tracking benchmark for one of the most heavily-traded ETFs, the PowerShares QQQ Trust (QQQQ), which was previously known as the Nasdaq-100 Trust. Now, traders commonly refer to the $21 billion QQQQ ETF as the "Cubes." The Cubes fell harder than the broad U.S. stock market, as measured by the S&P 500, during this summer's credit-inspired drop. However, it's snapped back higher during the recovery. Currently, QQQQ is up 24.3% year-to-date.

For full disclosure, some of Tom Lydon's clients own QQQQ.

Nasdaq Steps Up Its ETF Presence

In response to the ETF boom, the Nasdaq Stock Market exchange launched a market specifically for ETFs and index-linked investments today. Of the three main indexes, Nasdaq currently houses the fewest number of ETFs, although it does have the popular PowerShares QQQ (QQQQ). The launch of the new Nasdaq ETF Market aims to change that.

"The Nasdaq ETF Market heightens the competition in an industry that is entering a new phase. As electronic exchanges become more dominant and specialists less active, the Nasdaq ETF Market is structured to provide unprecedented levels of liquidity and efficiency in ETF trading," said John Jacobs, Nasdaq executive vice president. "Investors - both institutional and retail - will be the ultimate beneficiaries."

Besides focusing solely on ETFs, the new market differs from other exchanges in a few other ways, reports John Spence for MarketWatch.

• It's goal is to help ETFs flourish from their conception to reach their full potential.
• The new market features "designated liquidity providers" that will be held to execution standards and receive incentives to support ETFs in their early trading phases.

While the new market is exciting, some experts are concerned that new ETFs might not receive adequate funding because traditionally, specialists have helped develop the new products in their early stages and provide seed capital.

The creation of Nasdaq's ETF Market will open up more competition for the American Stock Exchange (Amex) and the New York Stock Exchange (NYSE). Already Amex is in the works to create and list actively-managed ETFs.

Is Consumer Confidence a Jinx on Small-cap ETFs?

Consumer confidence has an interesting relationship with market and exchange traded fund (ETF) performance. We are told consumer confidence is good for stocks and ETFs, says Gary Gordon for ETF Expert. Yet when you start to look a little deeper, consumer confidence tends to have the opposite effect, especially on Nasdaq and small-cap stocks.

If you look at small-cap performance lately, the correlation is there. Both the PowerShares QQQ (QQQQ) and the iShares Russell 2000 Index (IWM) declined steadily starting mid-July. Keep in mind that consumer confidence hit a six-year high mid-July. And IWM has yet to resurface above its trend line. This could be an indicator that the small-cap superb run has ended.

Nasdaq's New Portal Could Pave Way for More ETFs

John Jacobs, the creator of the Nasdaq 100 (QQQQ) exchange traded fund(ETF), the most widely traded ETF in the world, is attempting another big hit. He wants to bring private equity and debt markets to institutional investors with Portal, set to launch this summer.  Portal is a new trading platform from Nasdaq, which will be the first electronic trading place for buying and selling private securities.  Interest has been peaking in the private equity market, also known as 144As, as capital raised last year was more than in the IPO (initial public offering) market, reports John Birger of Fortune Magazine.

Jacobs believes this product represents more transparency, liquidity, and better pricing, in a dark market for institutional buyers.  Portal will open a "back door" for individual investors to own 144A securities via mutual funds and ETFs.  ETF providers can request to have an ETF based on the Portal index.

Five ETFs To Watch As The Stock Market Rebounds

Stocks have launched an impressive recovery in the past few weeks and some exchange traded funds (ETFs) have led the pack. There isn't a lack for choice, as over 400 ETFs are available representing all asset classes, industry sectors and many global regions. The key is to hone in on those markets that have shown the most strength as this global market recovery takes shape. Here are five ETFs to keep on your radar screen:

PowerShares Aquires Nasdaq ETFs

PowerShares Capital Management, will soon be the sponsor for one of the most traded exchange traded funds (ETFs) on the market, Nasdaq 100 Trust (QQQQ).  Nasdaq will give up the ETF on March 21. This ETF follows 100 of the largest non-financial companies listed on the exchange.

PowerShares will also handle four BLDRs ETFs based on the Bank of New York ADR Index.  They include: BLDRs Emerging Markets 50 ADR (ADRE), BLDRs Developed Markets 100 ADR (ADRD), BLDRs Europe 100 ADR (ADRU) and BLDRs Asia 50 ADR (ADRA).  Travis Altman of TheStreet.com reports these acquitsitions will greatly add to PowerShares assets. None of the ticker symbols or expense ratios will change due to the transaction.

U.S. ETFs Assets Rise In January

In January alone, assets of U.S. listed exchange traded funds (ETFs) rose about $5 billion, or 1.1%, to $422 billion.  Reuters reported 28 new ETFs were launched during the month, bringing the new total to 387. Internationally, ETF investing had a growth of $3 billion in assets or 2.8%. The top three U.S. listed ETFs by dollar volume last month were:

1. S&P 500 SPDR (SPY)
2. NASDAQ 100 Index Tracking Stock (QQQQ)
3. iShares Russell 2000 Index Fund (IWM)

For full disclosure, some of Tom Lydon's clients own IWM.

Benchmark ETFs Up Based on Volatility Index

The Chicago Board Options Exchange Volatility Index (VIX) closed at its lowest level recently as steady gains in U.S. stocks and exchange traded funds (ETFs)seemed to put investor's minds at ease.  Reuters reports VIX is Wall Street's fear gauge, as it tracks projected market volatitliy embedded in the S&P 500 option prices.  Thus VIX moves in the opposite direction of the benchmark - it moves up when investors believe risk levels are high.  So as the benchmarks have been hitting new highs recently, the VIX is hitting lows (see the chart below).

Some of the more popular ETFs are:

• Diamond Trust (DIA)
• SPDRs (SPY)
• Nasdaq 100 Trust Shares (QQQQ)

For full disclosure, some of Tom Lydon's clients own DIA.

PowerShares to Sponsor QQQ ETFs

Powershares Capital Management, a leading provider of exchange traded funds, announced an agreement to take over sponsorship of the Nasdaq-100 Trust (QQQQ), the NASDAQ-100 European Tracker (EQQQ), and four BLDRS Index ETFs (ADRE, ADRD, ADRU, ADRA).  After SEC approval, sponsorship of the ETFs will be given to Powershares. Powershares does not plan to make any changes to the total expense ratios of the funds and the ticker symbols are expected to remain the same, as told by Marketwire.  Powershares is the second largest issuer of ETFs in the marketplace, and one of the most innovative as well. This transaction will bring greater distribution channels for the funds and supply investor education and access to innovative products.

Tech Exposure with QQQQ ETF

The recent rotation out of oil stocks has lead to institutional money flowing into the Nasdaq Index. The earnings have been good as well from heavy weights such as Oracle (ORCL), Cisco (CSCO) and Apple (AAPL).

The Nasdaq 100 Trust Shares (QQQQ) has formed an inverse head & shoulders pattern & with recent strength is past its 200-day MA and making a run for the 42-43 level.

With the third quarter earning season here, investors can place their bets, whether long or short, on the tech stocks by taking advantage of the exchange-traded fund QQQQ.

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Yaser Anwar is a guest author at ETFtrends & the editor of Investment Ideas by Yaser Anwar blog. The author of this article is not a registered financial advisor & does not give investment advice. This article does not comprise any solicitation to buy or sell securities, ETFs or other investment vehicles.

ETF Trends-New NASDAQ 100 Equal Weight ETF

The First Trust NASDAQ-100 Equal Weight Index Fund (NASDAQ: QQEW - News) is launching today. This exchange-traded fund is designed to replicate the holdings and weightings of the NASDAQ-100 Equal Weighted Index, an equal weighted version of the NASDAQ-100 Index which includes 100 of the largest non-financial securities listed on The NASDAQ Stock Market based on market capitalization.

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