Contrarian ETF Bets to Consider (FCG, IYW)

The current state of affairs in global equity markets can be summed up with one four-letter word: Ugly. Selling in May is working nicely,

. Unfortunately for the bulls, May's showers could easily give way to

. At the moment, it's hard to envision fortune favoring the brave, but for those with an appetite for risk, some ETFs that have recently been sold off could make for compelling contrarian plays.

If ETFs were to be named after rap albums, IYW would be named for the Jay-Z's "Blueprint 2: The Gift & The Curse." IYW's gift and curse are the same thing: An almost 22% allocation to Apple

. IYW makes for an ideal contrarian bet for those that expect Apple will come roaring back and that the broader market will follow. Don't forget the Dow stock with largest weight in that index, IBM

, accounts for over 9% of IYW's weight. Overall, five Dow stocks are found among IYW's top-10 holdings, indicating this ETF can be profoundly impacted by the blue chip index's fortunes.

The Market Vectors Junior Gold Miners ETF is the epitome of a contrarian play. Logically, it's hard to get excited about an ETF that tracks commodities producers

. And there's no getting around the fact that before Thursday's almost 4% gain, GDXJ's recent string of lower closes amounted to all-time closing lows. Investors face a conundrum with GDXJ and it revolves around these questions that are tough to answer at the moment. What is the maximum amount of downside the ETF is likely to incur from here? Is the bottom in for gold prices? How long will GDXJ have to be held before decent profits are realized?

Readers of this space by now know that we've been bullish on

. Until the past few days, VNM

, but the sellers have found their way to this ETF, which had been one of the best performers among traditional long ETFs this year. The must-knows regarding VNM's validity as a contrarian play are as follows: The 200-day moving average must hold as support. Investors must accept that growth in the Southeast Asian nation, though slowing, is still vastly superior to what will be found in most developed markets. Government efforts to stimulate the economy and shore up Vietnamese banks, VNM's largest sector weight, must prove successful.

First, the good news. Natural gas prices have been in rally mode lately, a scenario highlighted by an almost 30% run-up in the United States Natural Gas Fund

. The Energy Information Administration has cut its production forecast while raising its demand outlook for natural gas. That has been a boon for UNG, but not for the equity-based FCG. And that's the point with FCG that investors need to be aware. It's a stock ETF whose components produce oil and natural gas and despite the natural gas rally, FCG is being hammered just like any other equity-based ETF. If FCG falls further, the test will be whether support at $14 holds. If it does, and natural gas prices hold steady or keep rising, FCG becomes a fine contrarian idea.