Following Friday’s (7/30) action, our monthly models (Models & Products > Models) underwent evaluation for the seventh time this year. Keep in mind that a “monthly evaluation frequency” does not mean a strategy will make a trade each month, but simply informs us that it could given it is up for review. In fact, more often than not, strategies will not make trades every evaluation period. Nonetheless, to assess the latest changes we filtered our models page (partially depicted below) for strategies that use a monthly update frequency by their respective activity. As a result, we saw our ESG stock models (Top 20 and Top 10) make the most trades at seven and five.

A few notable themes following the latest update include a sector tilt back towards financials and away from energy; we saw several models make this trade. For our latest feature on the energy sector, click here. Also, note that many of our strategies kept overweights in sectors like consumer discretionary, industrials, and technology. On the size and style front, the preference for growth over value prevailed along with sustained favoritism for domestic over international markets.

Although it is unlikely, and perhaps unjustified, for one to implement each of these models in a single portfolio, they can still serve as useful proxies for market sentiment and offer guidance on trends. Additionally, you can consider using the models as “idea generators” for sector ETFs, ESG plays, or even broader market positions. To receive email alerts on model trades, make sure the bell icon is blue. To simply group your favorite models, click the star icon to turn it blue.

Note that we will dive deeper into the FSM (Fund Score Method) model changes later this week in our Fund Score Overviews, following their evaluation tomorrow (8/3) night.

While July was a generally positive month for US equities, small-cap names have continued to see a period of consolidation that began in March of this year. Small-cap stocks were among the strongest areas of the US equity market as we began the year. The iShares Russell 2000 ETF gave four consecutive buy signals from October of last year through January, before reaching a new all-time high at $230 in February. The fund has since been stuck in a trading range between that February high and the $210 level it pulled back to in March, seeing multiple column reversals but moving largely sideways over the past five months. The broad small-cap fund most recently moved lower in July to give a sell signal at $210, its first such signal since September of last year but is now within one box of a reversal back up into a column of X's intraday Monday, which would come with movement to $225. IWM has held onto a suitable fund score of 3.82, which bests the average US fund of 3.66. The fund now sits in a relatively normalized trading territory at just -17% oversold through Friday's trading.

As we touched on last Friday, the next few months of the year have historically produced more muted returns for the core US equity benchmark, the S&P 500 Index. Last year, this worked out favorably for small-cap equities, as they began to outperform their large-cap counterparts heading into the end of the year. While the current market environment has indicated near-term strength lies with the broader large-cap space, the longer-term view of strength that can be seen through the DALI domestic equity size and style breakdown continues to have small-cap growth sit at the top of the nine style box rankings, a position it has maintained since January of this year. The small-cap growth group on the Asset Class Group Scores (ACGS) page has shown a retraction from score highs earlier this year but does maintain a favorable group score of 3.96 through trading Friday.

One of the strongest scoring funds within the small-cap growth group is the First Trust Small Cap Growth AlphaDEX Fund FYC. This fund also sits in a trading range at current levels of $72, but returned to a buy signal in June and reversed back up into a column of X's in July. The fund boasts a strong recent score posting of 4.51, besting the average small-cap growth fund (3.96) as well as the average US fund (3.66). The past few months of consolidation have left the fund at the middle of its ten-week trailing trading band, with initial support offered at $67 and further support seen at $66 and $65, the March low. Overhead resistance can be found initially at $74, seen in June and March, with the all-time high positioned at $77.

Technology is the most overweight sector within FYC at roughly 19% of the fund. The technology sector has also seen significant relative strength improvement over the past few months to currently sit in the second-ranked position in the DALI domestic equity sector rankings. One of the technology names within FYC that caught our eye is Synaptics Inc. SYNA, which pushed higher Monday to break a double top at $154. This 5 for 5’er has maintained a positive trend since December and ranks 7^th out of 44 names in the computers sector RS matrix. The stock has also been on an RS buy signal against the market since December 2019. The overall technical picture for SYNA is positive and continues to improve. Initial support can be found at $142 from July, while overhead resistance may be seen initially at the all-time high of $160.

Daily Option Ideas for August 2, 2021