Jeff Mackes adds ETFs can be used to bet against the market too. For example, he says the UltraShort QQQ ProShares (QID) has an inverse relationship to the NASDAQ.
Dylan asks the guys what they thinks about the ETFs sector by sector..
1. CONSUMER: Retail HOLDRS (RTH)
Jeff Macke says he likes the RTH but adds Wal-mart (WMT) and Home Depot (HD) make up over 30% of this ETF. If you don’t like Wal-Mart, he says don’t buy this fund.
2. TRANSPORTS: iShares Dow Jones Transport. Avg. (IYT)
Guy Adami says if he thinks the economy is heating up he buys this fund and, he adds only 11% of its holdings are in the airlines.
3. FINANCIALS: Financial Select Sector SPDR (XLF)
Pete Najairan likes the equal distribution of money center banks and investment banks in this ETF.
4. ENERGY: United States Oil Fund LP (USO), Energy Select Sector SPDR (XLE), Oil Service HOLDRs (OIH)
Eric Bolling says investors who want to play the price of oil should put their money in the USO, while investors who want to play energy more broadly should look at the XLE. Eric adds the OIH is concentrated on stocks that bring oil out of the ground.
5. DIGITAL REVOLUTION: Technology SPDR (XLK)
Jeff Macke says this ETF is focused on the guts of the digital revolution such as AT&T (T) and Cisco (CSCO). Pete Najarian adds this fund is not liquid at all.
6. COMMODITIES: streetTRACKS Gold Trust (GLD), iShares Silver Trust (SLV) Materials SPDR (XLB)
Eric Bolling says these funds have to buy the underlying commodities inherently, and he feels a smart trade is buying the commodity outright when a new commodity ETF is announced.
7. MEDICAL INNOVATION: Pharmaceutical HOLDRS (PPH)
Pete Najarian says the top holdings include Johnson & Johnson (JNJ), Pfizer (PFE), and Merck (MRK) and it’s extremely liquid.
8. HOUSING MARKET: SPDR S&P Homebuilders (XHB)
Guy Adami says he doesn’t like this fund because it’s doesn’t contain homebuilder names as its top holdings. He adds the top holdings are Lowe’s (LOW), Ethan Allen (ETH) and Sherwin-Williams (SHW). He says investors who want to play the homebuilders should buy and sell the individual homebuilder stocks.
9. DIVIDENDS: iShares Dow Jones Select Dividend (DVY)
Eric Bolling says the fund is good for investors who want to go into defensive mode.
In closing, Guy Adami says ETF’s are a great trading vehicle. Pete Najarian says he likes the top ETF’s but warns investors that smaller funds sometimes run into liquidity issues.
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Trader disclosure: On June 5th, the day this show was taped, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders Macke Owns (DIS); Najarian Owns (DNDN), (ERIC), (HLT), (JNPR (CBH), (IMMR); Najarian Closed Out Of (BIDU) Today; Bolling Owns (DIS), (T), (XOM), Natural Gas, Corn; Najarian Owned (HOT) On 6/4/07