The growth and evolution of the ETF industry is a story of investor demand. In the past, investors have been satisfied having access to products that have the ability to mimic the performance of benchmark indexes, but many are increasingly seeking out funds that try to beat the performance of their benchmarks. In order to meet this demand, a number of top providers have taken to launching active and pseudo-active ETF products.

Unlike traditional, passive ETFs which employ market-cap weighted indexing strategies, pseudo-active ETFs determine individual holdings based on a collection of criteria or a formula.

One popular of the more popular ETFs which makes use of an alterative indexing strategy is FCG.

In the past I have looked to this fund as an adequate proxy for playing the popular natural gas arena. Rather than using the United States Natural Gas Fund (UNG) , a futures backed product plagued contango and targeted by regulators, FCG tracks a basket of companies dedicated to the exploration and production of this fuel.

FCG is designed to track the ISE-Revere Natural Gas Index. Unlike a market cap weighted index, this basket of companies is equal weighted. According to the First Trust website, constituents chosen for the index are determined based on a number of metrics including price/earnings ratio, price/book ratio, return on equity and correlation to natural gas future prices. In the end, a total of 30 companies are chosen to represent the index.

FCG’s make-up is not permanent. Each quarter, First Trust evaluates the natural gas industry based on the stated criteria and makes any needed changes. While some of these are minor tweaks, as shown by the fund’s current state, dramatic changes can and do occur.

Comparing the fund’s current index to that of May 31, 2010 (a month after and a month before the rebalancing), one can see a number of significant alterations.

Before the rebalancing, FCG’s top five holdings included firms such as Mariner Energy (ME) , Pioneer Natural Resources (PXD) , Cimarex Energy (XEC) EOG, and Questar (STR) .

Today, FCG’s top holdings have shifted to include XOM, Anadarko (APC) , STR, Royal Dutch Shell (RDS.A) , and Noble Energy (NBL) . Other notable holdings not present in the past include Total (TOT) and Hess .

The top holdings highlight a shift in the fund towards large, integrated energy conglomerates that occurred after its June rebalancing. Furthermore, XOM is twice as large as the rest of the holdings due to its merger with XTO Energy (XTO) , which was also a holding in FCG.

Shifting towards integrated oil companies may pose an issue to diehards who have relied on FCG for exposure to companies solely dedicated to natural gas production. However, personally I still see FCG as a reliable alternative to playing the natural gas industry than other options like UNG. In fact, looking at the fund’s current breakdown, the fund may hold more promise than ever.

Thanks to the recent bout of economic turmoil and BP’s continued struggle to clean up the Gulf of Mexico, many of these successful, high yielding, integrated oil companies have gotten battered, despite seeing stable oil prices and a rebounding natural gas picture.

Their low valuations have helped them fit the criteria for inclusion in the portfolio of FCG and when they at last rebound, FCG will be well suited to take advantage.

FCG’s shift highlights the transparent nature of the ETF industry. Although the portfolios of non-traditional indexing strategies can sometimes change, investors can visit a fund’s Website and keep tabs on their ETFs’ underlying holdings to ensure that they continue to coincide with their personal investing goals.

Disclaimer

Winners

iPath Dow Jones-UBS Grains Total Return Subindex ETN (JJG) 2.9%
The grain-focused ETN is rallying today as well thanks to a strong jump in wheat prices. This crop’s gain stems supply fears in Russia, where drought conditions are threatening to constrict farmers’ yields.

Throughout July, the grains have seen an impressive rally, pulling broader agriculture funds such as PowerShares DB Agriculture ETF (DBA) along for the ride.

United States Natural Gas Fund (UNG) 1.6%
Warm weather forecasts are helping to lift natural gas prices on Wednesday, powering UNG higher.

In the near future, natural gas will be in the limelight as Washington Democrats and Republicans gear up to do battle over energy and oil reform.

According to the Senate bill’s current text, natural gas is expected to be a major beneficiary as lawmakers look to provide incentives for natural gas vehicles.

While attractive on paper, UNG will face strong headwinds in the near future as regulators crack down on futures trading. Investors should look to First Trust ISE-Revere Natural Gas Index ETF (FCG) to play the fuel.

PowerShares DB Base Metals Portfolio (DBB) 1.4%
After yesterday’s hiccup, base metals appear to have returned to their upward path, testing levels seen right before its early June breakdown.

Copper is doing its part to keep this fund up. iPath Dow Jones-UBS Copper Total Return Subindex ETN (JJC) is up 1.4% today.

Losers

iShares Dow Jones U.S. Home Construction Index Fund (ITB) -2.5%
Home construction firms are tumbling for the second day in a row on Wednesday.

After the bell today, investors will look to top 10 holding Ryland Group (RYL) for its second-quarter earnings report. Investors do not appear overly optimistic however, as shares of RYL are currently down more than 5%.

SPDR S&P Biotech ETF (XBI) -1.8%
The biotech industry began this week on a high note, with XBI powering through its 200-day moving average for the first time since mid June. However, the past two days have been rocky for the fund.

Leading the industry lower today are Cephalon (CEPH) and United Therapeutics (UTHR) . Both firms are down more than 6%.

iShares Dow Jones U.S. Healthcare Providers Index Fund (IHF) -1.4%
The healthcare provider ETF has been bashed around over the past week, carving out new 2010 lows on Wednesday.

One of the biggest drags on this fund’s performance today is Wellpoint (WLP) , which is struggling to stabilize after reporting its second-quarter earnings report. The stock is getting knocked despite beating analyst expectations and raising its outlook.

Market Vectors Vietnam ETF (VNM) -1.1%
Throughout July and much of June, the Vietnam ETF has traded in a sideways manner, indicating little direction.

Southeast Asian country ETFs are some of the best performing ETFs this year, but VNM has yet to join them.

Disclaimer

Investors seeking exposure to the sector may seek coverage through the Market Vectors Coal ETF (KOL) .

However, after Massey (MEE) reported dismal earnings at the market close Tuesday, investors may question coal as a stable choice.

The company reported a net second-quarter loss of $88.7 million and a loss of $55.1 million for the first half. The net loss for the quarter included associated costs in connection with a deadly mining accident in April.

The company’s operations further slowed in the second quarter after a sluggish first quarter. Likewise, KOL saw a similar slowdown in the second quarter, as 2010 has been much more sluggish than 2009 when the fund was a leader in the market rally.

While the S&P 500 is essentially flat for the year, KOL is down by roughly 5% year to date. By contrast, the S&P 500 gained 20% and KOL more than doubled, up about 120%, for the same time period in 2009.

In the second quarter, KOL stock fell by 23%, whereas the S&P 500 lost 12%. By contrast, the fund and the S&P 500 both grew by about 5% in the first quarter.

The fund’s sluggishness can be attributed to concerns of a slowdown or stall in the global economic recovery. Sentiment in the industry is increasingly dependent on the economic outlook of China and other developing economies. In particular, the world is increasingly looking to East Asian demand as a source of support for coal prices.

Earlier this year, China’s efforts to damper a potentially overheating economy took the wind out of KOL’s sails. Although China’s economy is expected to perform well, second-quarter growth for the Chinese economy is already slower than that of the first quarter.

While only 21.9% of KOL’s total holdings are in Chinese companies, other companies in the sector will also be affected by the impact the Chinese economy has on coal markets.

Of course, the recovery in the U.S. and elsewhere in the world are also still very important and KOL remains a play on economic recovery in important economies. For instance, fear of European underperformance and poor expectations for the United States could both reflect negatively on KOL.

Investors looking for more direction within the industry will gain new perspective on the coal sector when Arch Coal (ACI) , yet another holding of KOL, reports earnings before the market opens on Friday.

However, investors should understand that for now, KOL is be more sensitive to broad economic outlooks as opposed to the earnings of individual companies.

Disclaimer

The story of energy underperformance is perhaps best exemplified by the performance of Exxon Mobil (XOM) .

In early July, shares of the oil giant fell below their 2009 lows, hurt by the stock market selloff and a sharp drop in oil prices in the preceding weeks. While other oil firms slid during this period, XOM underperformed other majors such as Chevron (CVX) and ConocoPhillips (COP) . Even some of the companies involved in the BP disaster, most notably Anadarko Petroleum (APC) , did not fall below their 2009 lows.

Earnings estimates for the current quarter have been trending up for Exxon, but the full year and next year estimates have been declining. CVX and COP have also seen a decline in estimates for next year’s earnings, though their shares have performed much better.

Investors appear to be pricing in a very negative outlook for these companies, with lower energy prices and very slow global economic growth, but oil prices are close to $80 a barrel and natural gas prices have rebounded from their lows, while growth in emerging markets remains robust and is offsetting the slow recovery in developed markets.

The BP disaster has helped overshadow the positive news over the past two months. Negative news from the Gulf and the deepwater drilling ban has weighed on shares in this sector. Meanwhile, positive economic data from Asia has gotten little attention.

China continues to grow at near 10%, with the pessimistic forecasts from the country calling for 9.5% growth. Although China disputed recent analysis that declared it the world’s largest energy consumer; but at these growth rates, it won’t be long before China takes the crown.

India has had a very quiet economic recovery. The country raised interest rates again yesterday as growth remains strong and inflation is above 10%. With almost 2.5 billion people in these two countries, global energy demand can only increase in the long-run.

In terms of valuation, XOM, COP and CVX trade for roughly 10 times this year’s earnings, while yielding between 3 and 4%. They’re even cheaper using next year’s anticipated earnings, which I think are too low.

The ETFs that offer the most exposure to these domestic players are XLE and iShares Dow Jones U.S. Energy (IYE) .

Exxon is the largest holding in these energy ETFs by a large margin, which has contributed to the general underperformance of these funds relative to the broader market.

XLE is the more balanced of the two, but it still holds 18.4% in XOM, 13.5% in CVX and 5.3% in COP, for a combined 37.2%. Other familiar energy names round out the portfolio, but the allocations quickly drop to 2.6% by number 10 holding APC and down to less than 0.5% for the smallest holdings in this fund.

IYE is even more concentrated, despite having more than twice as many holdings at 88. XOM, CVX and COP make up 43.5% of IYE and allocations similarly slide rapidly by the time on reaches the number 10 holding, also APC, with 2.3% of assets.

Much of the rest of the portfolio includes companies with small or no dividends at all, so XLE and IYE sport yields of 1.9% and 1.6%, respectively. In addition to having half as many holdings, XLE also has half the expenses, at 0.21% versus 0.47%.

For a larger yield, investors can use WisdomTree International Energy. The fund yields 3%, and its fees and holdings are midway between XLE and IYE, at 0.58% and 61.

DKA is also a little more balanced, with Total (TOT) its single largest holding, at 8.3% of assets. However, it does hold two classes of Royal Dutch Shell ( RDS-A ) and ( RDS-B ) , which combine for 12.8% of assets.

Country exposure is led by the U.K. and Australia, at 20.8% and 18.2% of assets. France, Norway and Italy each account for 10-12% of assets. Spain, China, Japan, Netherlands, Austria and Portugal make up the bulk of the remaining exposure.

Over the past year, SPDR S&P 500 (SPY) gained 16%, while XLE, IYE and DKA returned 7.9%, 3.4% and negative 2.0%.

Major oil companies including XOM, CVX, COP and TOT start to report earnings this week. Short-term investors looking for a trade may want to wait to see if those earnings prove to be a catalyst, but long-term investors can add shares and get paid while they wait for the sector to rally.

Disclaimer

Winners

SPDR KBW Regional Banking ETF (KRE) 1%
The financial industry is scoring gains today, lead by the smaller, regional players. FirstMerit (FMER) is leading KRE’s portfolio higher, up over 7% in early afternoon trading thanks to second-quarter profits that beat analyst expectations.

FMER is KRE’s eleventh largest holding, representing 2.5% of the fund’s total portfolio.

iShares MSCI Italy Index Fund (EWI) 1.6%
The euro’s strength is helping to power ETFs that track the most volatile members of the bloc higher. EWI and iShares MSCI Spain Index Fund (EWP) are two of the strongest international-focused ETFs today.

EWI’s recent strength has helped the fund recover back towards levels at the start of May. Despite this strong run, investors should continue to look elsewhere for international exposure. Europe remains a volatile area.

Market Vectors Nuclear Energy ETF (NLR) 1.5%
The nuclear energy ETF is heading higher today with uranium miners such as Cameco (CCJ) and Uranium One taking the lead.

Over the past few days NLR has seen a good amount of strength, driving the fund back to the highs it reached in June.

Losers

SPDR S&P Metals & Mining ETF (XME) -3.3%
The materials industry has had a nice run the past few days as investors regain some confidence and pour back in the market. On Tuesday, however, funds such as XME, PowerShares DB Base Metals (DBB) , Market Vectors Steel ETF (SLX) and Market Vectors Coal ETF (KOL) are taking a breather.

PowerShares DB Precious Metals Portfolio (DBP) -2%
ETFs designed to track the various aspects of the precious metals market are taking a shot today as well. Everything from physical gold and palladium to silver miners are treading along in negative territory as the market faces jitters.

DBP is unique because it tracks a basket of gold and silver futures contracts.

iShares Dow Jones U.S. Oil & Gas Exploration & Production Index (IEO) -2.1%
Oil prices are steady today but it is not enough to stop funds such as IEO, iShares Dow Jones U.S. Oil Equipment & Services Index Fund (IEZ) , and Oil Services HOLDRs (OIH) from falling lower.

Pressuring these funds is Occidental (OXY) . Although the fund reported an increase in second quarter earnings, it failed to meet analyst expectations.

Disclaimer

iPath S&P 500 VIX Short Term Futures ETN (VXX)
When I first put together this list at the end of May, Europe was in the midst of a debt crisis and China’s government was taking steps to cool the nation’s overheating housing market. These factors were helped to construct an investing environment riddled with uncertainty.

Today, the same macro issues persist and volatility is still present making the VXX an exciting fund to watch. However, overall, this fund has struggled to return to the same heights seen in the final weeks of May.

Claymore/MAC Global Solar Energy Index ETF (TAN)
The sun has certainly been shining here in the Berkshires, driving the mercury to near triple-digit levels. As I predicted, the solar energy ETF was a fair weather fund and it has staged an impressive comeback over the past month, erasing nearly all of the losses suffered in May.

Although its recent ascension has been impressive, the macro tensions that still facing the European continent will ensure that the outlook for solar and other alternative energy sources remains shaded by uncertainty.

Claymore/NYSE Arca Airline Index ETF (FAA)
The Icelandic volcano, which wreaked havoc on the European airline industry in the first half of 2010, has managed to stay largely dormant. However, this has not helped keep FAA on a clear flight path higher. Rather, the fund witnessed some choppy trading in June, approaching previous 2010 highs before tumbling back towards May lows.

In July, the fund appears to have found some strength thanks to strong earnings reports from major U.S. firms including UAL, Continental Airlines (CAL) and Delta Airlines (DAL) .

iShares MSCI Thailand Investable Market Index Fund (THD)
The bloody political protests that plagued this nation in May have died down and, according to the nation’s central bank, the overall economic impact was minimal.

While it admitted that risks still remain, in late July the Bank of Thailand provided the Thai markets with a positive outlook and raised its 2010 economic growth forecast.

THD has seen some strong action since the start of the summer, powering along a near uninterrupted upward trajectory and locking in new highs for the year.

Global X Silver Miners ETF (SIL)
The price of gold and silver continued to rally through June as investors turned to shiny metals as a way to avoid the tensions stemming from the European debt crisis. However, in late July, the paths of these two commodities diverged. Gold prices have taken a hit while silver has managed to remain relatively stable.

The miners have performed similarly, with SIL starting to outperform Market Vectors Gold Miners (GDX) .

While shaky, the U.S. and global markets remain on the road to recovery and the torrent of strong earnings reports hitting the markets in recent weeks appear to have stoked some confidence in the hearts of investors. A good outlook for the markets will bode well for industry-dependent silver.

ProShares UltraShort Euro (EUO)
Debt issues continue to threaten the euro-union’s economic picture. However, the currency itself has performed a dramatic about-face. After peaking in early June, EUO has since reversed back to levels last seen at the start of May.

While the euro’s performance in recent weeks has been impressive and it may continue to rally in August, the outlook for the currency and the EU region remain clouded in uncertainty.

PowerShares Dynamic Leisure & Entertainment Portfolio (PEJ)
Consumers have taken some time off to enjoy the summer sun but the leisure ETF has not seen the pop one would expect. Through June, PEJ stuck to the downward trend that it had remained locked in since late April.

While it has faced its fair share of pressure at the start of the summer season, the next few weeks may prove strong for PEJ. Optimistic earnings reports from index constituents including Marriott (MAR) and McDonalds (MCD) have helped the fund lock in new higher lows indicating that the negative trend may have broken.

SPDR KBW Regional Banking ETF (KRE)
Much to the chagrin of Wall Street giants, Washington lawmakers have at last succeeded in passing the massive sweeping financial reform bill.

While the regional banks underlying KRE have lagged large cap financial ETFs so far this summer, I believe this is more due to the broad market volatility than Washington reform. I continue to stand by the belief that smaller financial institutions are far more likely to avoid taking a hit as regulators brandish their newly strengthened hammer.

Disclaimer

Driven by widespread financial panic and a desire for stable investment opportunity, gold prices steeply ascended in May and June thanks to demand from American and East European markets.

Yet very recently, gold futures dipped in response to stronger U.S housing reports, as well as a recent set of European bank stress tests that took place last week, showing signs that, as fears of economic meltdown gradually subside, the yellow metal’s price acceleration may cool down.

In another example, the most actively traded gold contract, specifically for December delivery, dropped by $4.60, or roughly .4%, settling at $1,187 an ounce on the Comex division of the NYSE. Furthermore, U.S Treasury prices dropped in response to government data that showed a rebound in homes sales last month.

Overall, both trends suggest a recent increase in market confidence, which may, in fact, erode the high gold prices we have observed over the past few months. In short, as less concerned investors detach themselves from the refuge and financial comfort of gold holdings, the steep price spiking may simmer down relative to the past few frenetic weeks. This has also caused the miners to underperform in July, but that doesn’t make them a bad investment.

As I have mentioned in past articles , this fund and its junior miners sibling, Market Vectors Junior Miners ETF (GDXJ) , give investors the opportunity of ETF coverage on either established operations or more volatile explorers and small producers.

In terms of national diversification, Canadian companies lead the fund’s holding percentages, representing a substantial 60.2% of the fund’s total securities.

Meanwhile the U.S., South Africa and Peru follow in terms of country-weighting, each accounting for 13.9%, 13.2% and 4.3% of the fund’s total holdings, respectively.

In terms of top holdings, GDX’s largest players include Barrick Gold (ABX) with 16.3%, Goldcorp (GG) with 11. 9%, Newmont Mining (NEM) with 10.8%, Anglogold Ashanti (AU) with 5.9% and Kinross Gold (KGC) with 4.8%.

Over the past year, GDX gained 23.5% and it is up 6.5% thus far in 2010. That compares to a 14.7% gain and a 0.5% loss over the same period for SPY. Fidelity Select Gold (FSAGX) offers similar exposure. In terms of country diversification, FSAGX is largely rooted in Canadian gold corporations, with 50.6% of the fund’s assets designated to Canadian companies and 17.2% to American holdings. Other noteworthy nations include South Africa (11.2%), Australia (7.0%), and the United Kingdom (6.3%).

Almost mirroring GDX’s allocation, FSAGX’s top five holdings include Barrick , Gold Corp, Newmont, Anglogold Ashanti, and Randgold Resources (GOLD) .

In its entirety, FSAGX contains 107 individual holdings, and is relatively top heavy, with the top 10 holdings within the fund comprise 62.3% of its total assets.

In terms of performance, FSAGX has very similar returns as GDX too, up 23% in the past year and 6.6% in 2010.

Either fund is a good choice this week ahead of several earnings announcements. The three largest holdings in both funds, ABX, NEM and GG, all report earnings this week, as do Agnico-Eagle Mines (AEM) and Eldorado Gold (EGO) .

Even though gold prices have been flat over the past month, stalling the rally in gold miners, the price of gold remains elevated. That should translate into stronger earnings for the gold mining companies, which could lead to higher stock prices.

However, thus far investors haven’t rewarded the companies for higher earnings. Instead the stock prices have tended to follow the metal. Therefore, unless we see an earnings rally this week, investors may be stuck following the price of gold. For long-term investors, that provides the opportunity to pick up shares at less than their full value.

Disclaimer

Winners

SPDR S&P Biotech ETF (XBI) 3.7%
A slew of biotechnology focused ETFs are topping today’s list of winners. XBI is among one of the biggest gainers as top holdings Genzyme (GENZ) and Biogen (BIIB) jump more than 5% in afternoon trading.

Due to wild swings in individual companies, playing the biotech industry can be an exciting, albeit tricky endeavor. ETFs like XBI however, reduce this volatility thanks to owning a basket of stocks.

iShares Dow Jones U.S. Home Construction Index Fund (ITB) 2.6%
Today’s new home sales numbers were up today, providing the home construction ETF with some fuel to move higher.

Real estate and housing remain risky areas of the market. However, in recent days, ITB has managed to carve out a new July high, the first positive sign for the fund this month.

iShares Dow Jones Transportation Average Index Fund (IYT) 2.5%
Last week a collection of top IYT holdings released analyst-beating earnings reports, providing the fund with the momentum needed to retest June highs.

On Monday, top holding FedEx (FDX) added to the transportation industry’s positive outlook by increasing its earnings prediction for the third quarter. Strength can also be found from rail companies including Union Pacific (UNP) and CSX (CSX) , which were both up more than 2%.

ETFS Physical Palladium Shares (PALL) 2%
Precious metals with many industrial uses such as palladium, platinum and silver, are treading higher today as U.S. markets remain in positive territory.

Today’s increase brings PALL through its 50-day moving average for the first time since breaking below it in early May.

Losers

iPath S&P 500 VIX Short Term Futures ETN (VXX) -3.2%
The VIX-based ETN topping today’s list of losers has reverted back to early May levels as strong earnings help investors regain some confidence in the global economic recovery.

The iPath S&P 500 VIX Mid Term Futures ETN (VXZ) is seeing weakness today as well, dipping 1.1%.

iPath Dow Jones-UBS Grains Total Return Subindex ETN (JJG) -1.6%
Although it staged an impressive rally heading into the start of July, the grain ETN is taking a hit today, leading broader agricultural ETFs such as PowerShares DB Agriculture (DBA) and iPath Dow Jones-UBS Agriculture Total Return Subindex ETN (JJA) lower.

Market Vectors Gold Miners ETF (GDX) -0.7%
Gold prices are starting off the week on a weak note as investors flee the metal in favor of riskier asset classes. In response to the slumping commodity, gold miners are taking a hit. Several major holdings in GDX will report earnings later this week.

Disclaimer

Solar ETFs have taken a beating in 2010. TAN fell from almost $11.50 per share in early January, all the way down to $6 in June, a nearly 50% drop in six months. KWT saw similar results.

The decline erased most of the post-crash rally in solar ETFs. Although they did not reach their all-time lows, shares were as cheap as they were toward the end of March 2009.

Over the past two months, however, the behavior of solar ETFs has changed. While they spent most of the previous year lagging the broader stock market indices, they’ve started to outperform since June. TAN and KWT bottomed earlier that month, making a higher low in early July, while the SPDR S&P 500 (SPY) hit a new low in July.

However, these are not the only ETFs to behave in this manner. The charts of European country ETFs show similar patterns, which provide some clue to the rebound in solar shares. European companies represent a significant slice of assets in the solar ETFs, and more importantly, European governments provide some of the most generous subsidies to the alternative energy sector.

Country exposure is relatively straightforward. Almost 20% of KWT’s assets are in Germany, while 0.5% represent Spain. Great Britain accounts for another 1.4% of assets and its markets behaved similarly. TAN reports 27% of assets in Germany, 2.3% in the U.K. and 1.3% in Spain. Also, Switzerland’s markets have outperformed their broader European counterparts, and TAN has 5.3% of assets in that nation.

Beyond direct exposure to European shares are the European subsidies. First Solar (FSLR) ’s performance has mirrored that of European stocks, while even SunPower (SPWRA) has shown similar correlation. SunPower has been among the worst performing solar stocks, hitting a new all-time low in June; shares are still down almost 50% this year, yet even it has followed the group higher.

European governments slashed solar subsidies in the wake of budget and sovereign debt crises over the past year. However, most of the cuts are priced in, and the stabilization in Europe has kept further cuts off the table for now.

With the euro rebounding against the U.S. dollar, the American and Chinese solar producers have seen the value of remaining subsidies increase. (China represents about 30% of assets in both funds.)

There have also been some delay in the cuts. In Germany, the cuts will be implemented in two steps, with the bulk of them retroactive to July 1, others coming on Oct. 1.

As the subsidies stabilize and the global economy continues to chug along the path to recovery, investors are starting to turn their attention to solar earnings. This week, First Solar and MEMC Electronic Materials (WFR) report. Estimates for FSLR have held steady and the stock has performed well over the past month, whereas WFR has seen estimates drop and shares hit a new low in early July.

However, Barclay’s upgraded WFR this morning and raised estimates; shares spiked about 3% in midday trading. This upgrade bodes well for the future success of solar investment.

FSLR is the top holding in both solar ETFs with roughly 10% of assets, making it the most important single stock in terms of direct impact. WFR supplies the industry, however, and a good report or surprise upside could extend the rally this week.

That said, I’d still look for some consolidation ahead of earnings reports in mid-August, as TAN and KWT have already gained more than 25% in July, and I wouldn’t chase shares in the wake of positive earnings this week.

Disclaimer

CurrencyShares Euro Trust(FXE)
This week we’ll start to learn how investors interpret the stress tests.

Concurrent with the European stress tests was news that Hungary’s debt rating is up for review at Moody’s. The country has broken off talks with the International Monetary Fund as the prime minister called for “economic sovereignty.”

Due to the exposure of Western European banks, a crisis in Eastern Europe could make the stress tests mute, though there’s no sign of a major problem in Hungary at this point.

iShares Dow Jones U.S. Oil & Gas Production & Exploration Index(IEO)
Occidental Petroleum(OXY), Noble Energy(NBL) and Valero(VLO) report earnings this week.

The firms are all top 10 holdings in IEO, accounting for 21% of its assets. OXY is the largest holding in the ETF, with 14.6% of assets. The other two firms have less than 4% of assets.

Oil prices tanked in May of this year, but they’ve moved sideways over the past two months and are about where they’ve been for the past nine months. Natural gas prices have been low for most the year, but are currently higher than in April and May.

The BP(BP) disaster has overshadowed the industry, but earnings season should refocus investors on the bigger supply and demand picture in the industry. Last week, oil service firms Halliburton(HAL) and Schlumberger(SLB) reported strong earnings and there was the disputed story about China surpassing the United States in energy usage. Whether the report was accurate or not, China will eventually get there.

The oil majors also begin to report earnings this week, so expect a focus on energy. Also, several other top 10 holdings in IEO will report next week, so this will be an important two-week period for the group.

Market Vectors Gold Miners(GDX)
Companies representing nearly 50% of assets report earnings this week. Top three holdings Barrick Gold(ABX), Goldcorp(GG) and Newmont Mining(NEM) account for 16.5%, 11.9% and 11.5% of assets and will be the most responsible for leading the group higher or lower this week.

NEM is close to a 52-week high, but ABX and GG have slipped and pulled GDX along with them.

GDX has stubbornly refused to exceed its March 2008 all-time high, when gold was priced about 20% lower. Shares would need to rally about 13% to exceed the 52-week high, with a little further to go to hit a new all-time high.

NEM and ABX have beaten analyst estimates in the past year and estimates have been rising, but the picture is mixed with GG. Either way, earnings haven’t proved much of a catalyst for rallies in the past and until they do, in the absence of another leg up in the price of gold, GDX may continue to move sideways.

Claymore/MAC Global Solar Energy Index(TAN)
First Solar(FSLR) and MEMC Electronic Materials(WFR) kick off the solar sector’s earnings season this week.

FSLR surprised analysts when it beat their estimates by 22% in the first quarter, and estimates quickly rose for the second quarter. However, those estimates haven’t budged much in the past two months and analysts are looking for $1.60 per share in earnings, an increase of almost 25% from their estimate 90 days ago, about in line with the first-quarter surprise.

WFR has seen estimates drop over the past 90 days. The share price of WFR recently hit a new five-year low and shares have traded below the November 2008 low for almost three months.

It’s a mixed bag for other holdings and TAN trades about 70% above its March 2009 low, but also 30% below its January 2010 post-crisis high.

At almost 10% assets and as the No. 1 holding, FSLR has the most direct impact on TAN. Supplier WFR may be more important for a broader rally in the sector though, since its earnings are more dependent on trends in the sector.

I’m not optimistic about solar unless the price of oil climbs higher and TAN has bounced almost 30% from June lows. There may be more upside this week if FSLR beats earnings and its shares rally, but I expect the recent gains will consolidate in the coming weeks, ahead of the mid-August earnings from som

iShares: Nasdaq Biotech(IBB)
Amgen(AMGN), the top holding a 9.2% of this ETF, reports its earnings this week, with earnings estimates flat all quarter for the company.

IBB could use some good news after shares of Teva Pharmaceutical(TEVA) were hit on Friday. The company was beaten to market by Novartis(NVS) after the company won FDA approval for a generic version of Lovenox.

IBB has been below its 50-day moving average since May, but it could climb above it if this is an up week and that would be a bullish sign that further gains could be in store.

Market Vectors Coal(KOL)
This was one of the strongest performing ETFs last week, along with Market Vectors Steel(SLX). A couple of holdings report earnings this week, but shares climbed right through their 50-day moving average last week and are ready to break the 200-day moving average this week.

KOL, which was a market leader during the post- crash rally, saw its shares peaked in January 2010.

Corporate earnings have been good in general this quarter, but economic data has been mixed. A strong performance by KOL, however, would be indicative of investor optimism concerning the global economic recovery.

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