First Trust is adding to its already expansive lineup of exchange-traded funds tracking Dorsey Wright index and methodologies with the debut of the First Trust Dorsey Wright DALI 1 ETF DALI.
The new ETF tracks the Nasdaq Dorsey Wright DALI 1 Index, which was launched just a few weeks ago, according to materials provided by First Trust.
“The Dynamic Asset Level Investing (DALI) process was designed as a tactical tool to provide guidance for asset allocation decisions among asset classes, as well as within asset classes, steering an investor toward those areas of the market that DWA believes may outperform,” said Illinois-based First Trust.
What Happened
DALI's index assesses relative strength on four major asset classes: domestic equities, international stocks, bonds and commodities. As is the case with many Doresy Wright benchmarks, point-and-figure charting is used to gauge price momentum of the securities being considered.
“The DALI process is used to evaluate supply and demand forces of asset classes, and rank them from strongest to weakest based on Nasdaq Dorsey Wright’s proprietary relative strength methodology,” according to a statement from First Trust. “The asset class with the highest relative strength score is selected for inclusion in the index and the fund’s assets will be allocated to ETFs that provide exposure to the asset class.”
Why It's Important
When DALI, the new ETF, tilts toward U.S. stocks, its selection universe will focus on the First Trust Dorsey Wright Focus 5 ETF FV, which holds First Trust bank, consumer durables, Internet and technology ETFs.
The First Trust Large Cap Growth AlphaDEX Fund FTC and the First Trust Small Cap Growth AlphaDEX Fund FYC will be DALI's other holdings when the new fund emphasizes U.S. stocks.
When DALI tilts toward international stocks, it will equally weight the components in FV's international equivalent, the First Trust Dorsey Wright International Focus 5 ETF IFV with 35 percent of the portfolio allocated to the First Trust Emerging Markets AlphaDEX Fund FEM and the First Trust Developed Markets ex-US AlphaDEX Fund FDT.
What's Next
“The DALI process was designed as a tactical tool to provide guidance for asset allocation decisions among asset classes, as well as within asset classes, steering an investor toward those areas of the market that Nasdaq Dorsey Wright believes may outperform,” said First Trust.
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