Just like that, another quarter has come and gone. The first quarter of 2010 certainly had its hiccups, but it was overall a strong one for the markets. The top long-only exchange traded funds (ETFs) this quarter are giving some clues about who’s leading the recovery so far.

  • First Trust Amex Biotechnology (NYSEArca: FBT): up 29.5%

There’s been much to like about biotechnology lately. It’s been awash in merger and acquisition activity this quarter, a sign of health in some companies as they snap up the weaker ones. FBT takes an equal weight approach to biotechnology, which is an appealing strategy when you consider that the success of many biotech firms rests one blockbuster drug – but the reverse is also true; an FDA denial could spell doom for a company. It’s one of the hardest sectors in which to single-stock pick. [Biotech ETFs for Any Risk Appetite.]

  • SPDR KBW Bank (NYSEArca: KBE): up 21.1%
  • SPDR KBW Insurance (NYSEArca: KIE): up 19.2%

The financial sector has seen a tremendous rally off the lows, but it’s really no surprise when you consider that the most beaten-down sectors tend to perform the best in recoveries. KIE has dusted any other financial sector ETF, surging 181% off the March 9, 2009, low. Recent performance aside, the financial sector still has a long row to hoe as Washington cracks down on big Wall Street firms. What kind of legislation that ultimately passes and how the big banks handle it will determine the direction of these ETFs in the coming months and years. [Financial ETFs in Turnaround Mode.]

  • iShares Dow Jones Regional Banks (NYSEArca: IAT): up 17.9%

As much as the big banks are under fire for lavish bonuses and irresponsible lending practices, regional banks have largely avoided the fray by staying away from high-risk loans. The threat of legislation won’t touch these banks, given them an added appeal to investors who want financial exposure. Caveat: regionals have a lot of commercial real estate on their balance sheets, a sector that many believe could become a threat. [6 ETFs for a Financial Recovery.]

  • Rydex S&P Smallcap 600 Pure Value (NYSEArca: RZV): up 17.9%

RZV is simply repeating history: small-caps tend to lead the way out of the darkness of recession. These small companies are nimble and quick to react as market conditions change. After really bad downturns (this would be one of those), they tend to do even better. After the 1973-74 recession, small-caps actually outperformed large-caps for an entire decade. This quarter, small-caps gained about 7%, while large-caps gained about 4%. [Hot New Trend: International Small-Caps.]

  • Claymore NYSE Arca Airline (NYSEArca: FAA): up 15.7%

The troubled airline sector is finally coming off one of its worst slumps in decades. With joblessness still high and consumers still hurting, the sector has a long way to go, but it’s moving in the right direction. Look at the numbers in February: air traffic was up 9.5%, cargo demand rose 26.5% and the average airfare rose 5%, leading to a revenue bump. Bear in mind, though, that these numbers are in comparison to one year earlier, when the industry was hurting big-time. [Airline ETF Ready to Take Flight.]

Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.