First Trust Focus Five Model

This week’s change to the Focus Five Model involves the removal of both the First Trust Nasdaq Oil & Gas ETF (FTXN) and the First Trust Energy AlphaDEX Fund (FXN) due to each falling below the sell threshold within the Model’s relative strength matrix rankings. In their place, the First Trust Nasdaq-100 Technology Index Fund (QTEC) and the First Trust Technology AlphaDEX Fund (FXL) are being added, as they are the highest ranked funds not already owned within the model’s matrix.

Both FXL and QTEC have maintained a buy signal on their default point and figure trend charts since April, and recent action has brought about all-time chart highs. Along with superior relative strength, the overall positive technical picture for both ETFs is positive with each fund maintaining a fund score in the upper 5 range (out of 6), outscoring their peers within the Technology (3.99) group on the Asset Class Group Scores.  

With the change, the model will rebalance the five holdings to equally weighted at 20% and will now maintain exposure to the Semiconductors (FTXL), Transportation (FTXR), Biotechnology (FBT), Technology (FXL), and Nasdaq-100 Tech. (QTEC). The addition of the two tech-related funds will bring the model up to its sector allocation maximum at 60%.

First Trust Size and Style Model

There is a change to the First Trust Size and Style Model (FTSIZESTYLE) for the first time since February.

For those not familiar with the First Trust Size and Style Model, the strategy is evaluated monthly and is driven by a tally matrix, like our Dynamic Asset Level Investing Rankings (DALI). Proxies representing the specified groups – the nine size and style groups in this case – are ranked within a relative strength matrix. The number of relative strength buy signals for each of the size and style group proxies is then ‘tallied’ in order to determine leadership.

In June, Mid Cap Growth eclipsed Mid Cap Blend within the size and style rankings, causing the model to remove the First Trust Mid Cap Core AlphaDEX Fund (FNX) and add the First Trust Mid Cap Growth AlphaDEX Fund (FNY).

On its trend chart, FNX has maintained a buy signal and positive trend since April, and more recent action has brought the chart a second buy signal at $106 as the fund moved to a new all-time chart high at $108. The fund maintains a score of 5.75, which is superior to the average score for a fund within the Mid Cap (3.97) group on the Asset Class Group Scores page.

With the change, the model will rebalance the three funds to equally weighted at 33.33%. The model continues to maintain an overweight to Large Caps and has shifted from a blend tilt to a growth overweight.

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 Focus Five (FTRUST5) and Size and Style (FTSIZESTYLE) 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, July 8th, 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, July 8th, 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, July 1st, 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)