First Trust Sector Model

The change to the First Trust Sector Model (FTRUST) involves the addition of the First Trust Nasdaq Pharmaceuticals ETF (FTXH). Recall the First Trust Sector Model utilizes an RS versus benchmark methodology, as opposed to an RS matrix of the model’s full ETF lineup. The First Trust Sector Model’s process compares each of the funds in the model’s universe to the S&P 500 Index (SPX) on a 6.5% scale RS chart. If the RS chart resides in a column of Xs, the ETF is included in the model’s holdings, while an RS chart residing in a column of Os warrants the fund’s exclusion.

Following Wednesday’s (2/4) action, the RS chart comparing FTXH to SPX reversed into a column of Xs after having been in Os since June 2023. FTXH has a strong fund score of 4.71 with the fund maintaining a positive trend on the default point and figure chart and positive near-term market RS since October last year.  More recent action has brought the fund above $35, a new all-time chart high. With the addition of FTXH, the First Trust Sector Model will rebalance with eight holdings to equally weight at 11.11% and continues to maintain an overweight toward technology and healthcare.

First Trust Thematic Focus Five Model (Total Return)

The change to the First Trust Thematic Focus Five Model (FTTHEME5.TR) this week involves the removal of the First Trust Dow Jones Internet Index Fund (FDN.TR) as it fell below the sell threshold within the model’s total return relative strength matrix. In its place, the Model is adding the First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index Fund (GRID.TR).

GRID has maintained a positive trend on the default point and figure trend chart since April of last year and currently shows positive near and long-term relative strength against the market, leading the ETF to sustain strong fund score of 5.81. With the change, the model will rebalance the five holdings to equally weighted at 20% and will now maintain exposure to the S-Network Streaming and Gaming (BNGE.TR), Clean Energy (QCLN.TR), Transaction & Processing (LEGR.TR), NextG (communications) (NXTG.TR), and Smart Grid Infrastructure (GRID.TR).

This weekly overview is designed to be used as a "radar" screen to bring your attention to potentially important technical changes that may require your attention and potential action. When evaluating the Fund Score, the strongest issues have scores of 4 or higher while those ETFs with scores below a 3 are no longer considered solid citizens.

The ETFs with the most relative strength buy signals (suggesting outperformance) versus the others in the group are listed at the top. These ETFs should be overweighted in the portfolio. Those ETFs with the least amount of relative strength buy signals versus the others in the group are listed at the bottom. These ETFs should be underweighted in the portfolio.

The First Trust ETF Portfolios are designed to identify major sector themes in the market place through the use of the Point & Figure relative strength tools. For more information on the portfolio construction and back testing, see the model info file on the models page.  To enter a portfolio amount and see shares to be purchased as well as modify the portfolio to your specifications, click here. (Note: The First Trust ETF Portfolios will be updated Wednesday mornings by 9:30 am EST) 

Weekly Changes:  There are changes to the First Trust Sector and Thematic Focus Five Models this week.

* - Dates prior to 1/9/2008, which is when the First Trust Sector ETF Model Portfolio became available in the First Trust Weekly ETF Report, are representative of when the position was added to the backtested model.

* - The next evaluation date for the Focus Five Model is Wednesday, February 25th, 2026. Dates prior to 10/20/2009, which is when the First Trust Focus Five ETF Model Portfolio became available in the First Trust Weekly ETF Report, are representative of when the position was added to the backtested model.

* - The next evaluation date for the Thematic Focus Five Model is Wednesday, February 25th, 2026. Dates prior to 9/13/2023, which is when the First Trust Thematic Focus Five ETF Model Portfolio became available in the First Trust Weekly ETF Report, are representative of when the position was added to the backtested model.

* - The next evaluation date for the International Focus Five Model is Wednesday, February 18th, 2026. Dates prior to 2/22/2012, which is when the First Trust International Focus Five ETF Model Portfolio became available in the First Trust Weekly ETF Report, are representative of when the position was added to the backtested model.

Am I better off owning the managed mutual fund or the unmanaged ETF? The table below will help you answer that question. For each of the nine major asset classes and sectors, see the Top 20 mutual funds in NAV compared to the First Trust Universe of ETFs. The results are ordered by Fund Score, from highest to lowest. The Fund Score is a snapshot of the overall health of the fund based upon relative strength versus the broad market, relative strength versus its peers, and other trend measures. Those ETFs and Funds with a score above 3 are considered solid citizens with those having scores of 4 and above ideal candidates for purchase. Those ETFs and Funds with a score below 3 should be examined closer from a technical basis as they are not holding their ground versus the market and their peer group.
 

(Click any link above to see the Fund Score of the First Trust ETFs and the funds with the largest Net Assets in that category)