There are changes to the First Trust Focus Five (FTRUST5) and Size and Style (FTSIZESTYLE) Models this week.

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.