A recent purchase by the firm is the Utilities Select Sector SPDR (NYSE: XLU). Stein says employment trends are stronger in that sector than the overall economy.

Astor has also established positions in the SPDR S&P Retail ETF (NYSE: XRT). "XRT has been flat this year while the broader market has slid more than 19%," said Stein.

In retail, analysts at Astor track consumer spending, which accounts for some 70% of the country's GDP.

"Consumer spending dropped by $500 million in the fourth quarter. That's an unsustainable drop with an unemployment rate of 8.1%," said Stein.

The recent outperformance of XRT—it was down nearly 2.5% so far this year early Thursday—suggests that consumer spending will pick up, according to Astor's analysis of the data.

"XRT's index is cognizant of market conditions and how they're playing out in the market," said Stein. "The ETF's performance is providing us with indications that consumers will return to more-normal patterns as the economy works its way through the recession."

Another move by Astor has been with the Semiconductor HOLDRs (NYSE: SMH). Its returns are down just slightly this year. That's after a drubbing last year where it lost more than 45%.

Historically, chip makers react quicker to slowdowns, says Stein. "At this point in the cycle, they're leaner and more efficient. So the very last part of this recession hasn't impacted semiconductor manufacturing as much as other sectors," said Stein.

China: Bounceback In 2009? 

Stein says he's also bullish on prospects for a 2009 rebound in China. He's investing in the iShares FTSE/Xinhua China 25 Index (NYSE: FXI).

"China's stimulus package is bigger than ours and because of the way its government works, when they make a decision to go ahead with an economic revival plan, it can be implemented almost immediately," he said.

China is creating a middle class about the size of France every year, Stein observes. "So it's basically building its own consumer base," he said.

Still, the firm's managers own some of the Short S&P 500 ProShares ETF (NYSE: SH), a position they've held since early last year. Stein says while he's seeing opportunities in specific sectors, the broader market is still slumping. He's planning on waiting for confirmation of a broad recovery before opening long positions in more-diversified index-based ETFs.

"It's very difficult to pick a bottom for an entire economy," said Stein. "But we really don't think that's necessary at this point to be a successful investor."

Instead, he prefers to segment growth and contraction patterns by sectors. Economic cycles move in various stages through different markets, says Stein.  

"Right now, we're seeing enough fundamental strength in the economy to invest in several different sectors," he said. "We've found that it's much more important to get the direction of the markets right than the specific timing of an overall economic recovery."  

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