There are two models with changes this week; the First Trust Sector Model (FTRUST) and First Trust Fixed Income Model (Total Return) (FTFIXINC.TR).

First Trust Sector Model (FTRUST)

There are two changes to the First Trust Sector Model (FTRUST) this week as the model is removing the First Trust Oil & Gas ETF (FTXN) and the First Trust Natural Gas ETF (FCG).  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 last Wednesday’s (4/15) trading, the model RS charts comparing FTXN and FCG to the S&P 500 reversed back into Os. FCG had been in a column of Xs and a model holding since mid-February and was able to gain more than 11%, outpacing the S&P 500 by more than 8%. FTXN meanwhile, was roughly flat during its short time in the model and lagged the benchmark.

The change decreases the model’s allocation to Energy, but the sector still remains overweight with the likes of Clean Edged Green Energy (QCLN) and Wind Energy (FAN) along with broader Energy (FXN). With the change the model to rebalance with nine holdings equally weighted at 11.11% and now maintains exposure to materials (FXZ), banks (FTXO), pharmaceuticals (FTXH), biotechnology (FBT), semiconductors (FTXL), and utilities (FXU).

First Trust Fixed Income Model (Total Return) (FTFIXINC.TR)

There is a change to the First Trust Fixed Income Model (Total Return) (FTFIXINC.TR) this week as the model removes the First Trust Low Duration Mortgage Opportunities (LMBS.TR) as it fell below the sell threshold within the model’s relative strength matrix. In its place, the model is adding the First Trust Senior Loan Fund (FTRSL.TR), which is the highest-ranking ETF in the matrix not already owned. With the change, the model will rebalance the four holdings equally to 25% and will maintain exposure to Preferreds (FPE.TR), Emerging Markets (FEMB.TR), Convertibles (FCVT.TR), and Senior Loan (FTSL.TR). Additionally, the weighted average yield among the ETFs within the model has increased to 5.05%. Year-to-date, the First Trust Fixed Income Model has gained 3.98%, outperforming its benchmark AGG.TR by more than 3% (through 4/21).