Latest news, trends and ideas for investing with exchange traded funds | ETF Commentary

This week’s rally could be fooling investors who are looking for an end to the bear market.

That’s according to Fortune’s Eugenia Levenson in the article Tracking the bear: How bad could it get?

In favor of the argument that the market established a low on November 20 and the recent decline is a retest of the bottom, Levenson cites Charles Schwab’s Jeff Mortimer and BlackRock’s Bob Doll and GMO’s Jeremy Grantham.

The view of the bear camp is represented by Federated Prudent Bear Fund’s Doug Noland who shorts stocks and ETFs. Noland believes that we have seen a permanent change in spending patterns that will result in a lot of companies seeing their earnings disappear.

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In the article ETF Advisers: One Day Is Not A Trend, Investors Business Daily’s Trang Ho talks to technical analysts and money managers to get their views on where the market goes from here.

The consensus seems to be that as long as we have volatility that generates 10% swings in a day, we’re still in a bear market. One manager has been betting against the NASDAQ since the beginning of the year with the ProShares UltraShort QQQ (QID) an ETF that doubles the inverse returns of the Nasdaq 100 index.

The same manager sees upside potential in the dollar, which is playable via PowerShares DB U.S. Dollar Index Bullish (UUP).

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The popular wisdom in sports is that the team with the best defense wins. Wall Street Journal Online writer David Gaffen builds on this theme in profiling money managers who are getting back into the market with defensive stocks.

In the MarketBeat blog post Defense Wins Championships… and Helps Returns, Gaffen notes that several managers see the recent steep fall off in the market as an opportunity to buy undervalued stocks at discounts that are rarely seen.

Managers are focusing on companies that can move higher despite a struggling economy, such as defense contractors, staples and even some oil companies.

In particular, Gaffen notes that since Thursday’s close, the defense-oriented AMEX SPADE Defense Sector ETF (PPA) is up 6%, and the Consumer Staples Select Sector SPDR Fund (XLP) has gained 4%.

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Money Magazine’s Carolyn Bigda, Paul J. Lim and George Mannes recently published a series of tips to make “lemons into lemonade” in their article 21 ways to stomach a sour market.

Tip 15 is to “Buy Low – The Brave Way”. The tip is based on an observation by contrarian investor David Dreman, “we’re going to look back and ask ourselves why we weren’t more aggressive in picking up bargains in this market.”

Money suggests that a safer play than individual stocks is to buy ETFs like the Financial Select Sector SPDR (XLF) or the blue-chip iShares Dow Jones Select Dividend Index (DVY), which invests in many sectors.

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