5 ETFs for the EU Summit (EPV, EWP, ITLY)

European policymakers meet in Brussels on Thursday and Friday in what is being hailed as the latest effort to hammer out substantive fiscal reform to restore economic health to the Eurozone. Financial markets have been down this road before: Traders get their hopes up that the latest EU summit will be the one that finally solves the region's debt crisis only to be let down when nothing definitive is solved. Arguably, expectations are already low as some marquee European ETFs are being hammered today. The reasons are obvious. Moody's Investors Service is expected to downgraded Spanish banks as soon as today,

. Spain, the Eurozone's fourth-largest economy, has formally requested assistance for its ailing banks. Yields on Italian and Spanish two-year sovereigns are blowing out today, the latest sign that investors' appetite for debt issued by the two PIIGS members remains tepid at best. With all that headline risk at play, consider the following ETFs in advance of the EU summit.

ITLY tracks the DB USD BTP Futures index, which features securities with an original term of no longer than 16 years and remaining term to maturity of not less than 8 years and 6 months. Surprisingly, ITLY has only lost 3.1 percent in the past 90 days. That is an almost bullish performance considering that many traders view Italy as the next European shoe to drop after Spain. On the other hand, it must be acknowledged that Italy is the only member of the PIIGS to not receive some form of bailout assistance--at least not yet. It is a big "if," but if policymakers are able to hammer out a plan for buying Italian and Spanish debt at this week's summit, ITLY would benefit.

The WisdomTree Europe SmallCap Dividend Fund is not the first ETF traders are thinking about heading into the summit, but the fund's country composition makes a valid play for the week. Eurozone countries account for nearly 59 percent of DFE's weight with Italy being the fund's second-largest country allocation at 13.5 percent. Specific to the PIIGS, only Greece is not represented in DFE. The other four combine for about a quarter of DFE's total weight. DFE is technically vulnerable. If support at $31 gives out, selling pressure would likely accelerate.

Ahead of the summit, the iShares MSCI Spain Index Fund is being battered to the tune of five percent on Monday. EWP is an example of a technically vulnerable ETF. Yes, EWP is flirting with $23, but support at $20 needs to hold. With a looming downgrade for Spanish banks, EWP is vulnerable to near-term downside because financials account for almost 41 percent of the fund's weight. On its own, troubled Banco Santander

is nearly 21 percent of EWP's weight. Due to severe headline risk and elevated bond yields, EWP is back at a place where the only way to play the ETF is short it or stay on the sidelines.

The ProShares UltraShort MSCI Europe is double-leveraged inverse answer to the Vanguard MSCI Europe ETF

. Those wondering about EPV's utility ahead of and after the summit only need to examine what countries comprise the MSCI Europe Index. According to MSCI, those countries are as follows: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. While the U.K. and Switzerland figure prominently in the index, the mere fact that Europe is in the index name is cause for alarm. That tarnishes VGK and makes EPV worth embracing.

With $21.7 million in assets under management and average daily volume of less than 38,000 shares, the iShares MSCI Europe Financials Sector Index Fund could be deemed an under-the-radar play in a more sanguine market environment. Unfortunately, sanguine is one of the least accurate ways of describing the current state of affairs in the Eurozone. An ETF devoted exclusively to European bank stocks is apt to be punished these days and that is what has happened with EUFN. The fund is off 19.2 percent in the past three months. If EUFN trades below $14, it is vulnerable to a return to its 52-week low around $13.70. For more on Europe ETFs, click

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