When bear markets rally, it’s often the small caps and technology stocks that lead the way. Here are 3 ETFs that may help you make the most of the current rally.

iShares MSCI Emerging Markets ETF (EEM ).

The EEM is comprised of 329 stocks from countries that have yet to mature economically. This translates into high potential for growth. The holdings are focused primarily in South Korea, China, Brazil, Taiwan, Russia, South Africa, and Mexico. EEM has gained 29.58% year to date and carries a yield of 1.8% with an expense ratio of 0.72%. But a word of caution: while emerging markets are capable of incredible growth, they can turn on a dime and deliver punishing losses – EEM lost 50% in 2008.

Direxion Daily Small Cap Bull 3x Shares (TNA)

As the name suggests, the Direxion Daily Small Cap Bull aims to triple the performance of its index, in this case the Russell 2000. It uses leverage to accomplish this, so it should be treated as a real live wire. The Russell 2000 follows small cap stocks between $250 million and $3 billion. This is where high growth is often seen earliest.

Because this ETF uses leverage, it is not for the passive or buy-and-hold investor. Rather, it is best for short term speculators who can handle the occasional big loss. TNA is down 9.52% for the past 3 months, but up 35% YTD. It’s expense ratio is 0.95%.

Technology Select Sector SPDR (XLK)

The Technology Select Sector SPDR is one of the largest tech ETFs going. It has $2.8 billion in assets, and tracks tech stocks in the S&P 500. Good performance from Apple and Intel have pulled the tech sector higher despite poor performance from other stocks in the index. Microsoft, AT&T and IBM make up the top 3 holdings (out of 79 total).

XLK is up 27% YTD and has a yield of 1.59%, though it was down 41.39% for 2008. It sports an expense ratio of only 0.21%.

It’s hard to tell if this has been a sucker’s rally that’s about to end, or a natural rebound to fair market values (evidence exists to support both sides), but these ETFs should provide you with good diversification and an excellent chance to catch the return to economic growth when it happens.

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