First Trust Financials AlphaDEX (FXO)

On our desk, we are closely tracking the valuation discount on FXO. With a portfolio P/E of 11.30x compared to the category average of 12.93x, the fund offers a robust valuation cushion. However, the recent exit from a core quantitative model portfolio highlights temporary friction in broad quantitative sector strategies relative to targeted industry bets.

Looking at the short interest data for late July 2026, short volume dropped drastically by 64.2% down to 14,847 shares, representing a tiny 0.1% of the float with a days-to-cover ratio of just 0.4 days. This severe reduction in bearish bets removes a major short-squeeze catalyst but indicates lack of aggressive downward speculation.

Evaluating the underlying portfolio construction, FXO holds roughly 104 positions with top weightings allocated to First American Financial Corporation at 1.85% and Bank OZK at 1.79%. The dividend yield sits at 2.28% backed by a low 25.11% payout ratio, signaling solid income durability for long-term holders.

Watching the technical indicators, FXO is hovering around $65.57 to $66.87, trading above its 60-day simple moving average of $63.41 and 200-day moving average of $60.61. With a daily RSI of 47 signaling neutral-to-slight-oversold conditions, quantitative signals point to a balanced near-term outlook with no major resistance levels remaining overhead.

From a macroeconomic standpoint, the Fed holding rates in the 4.25% to 4.50% bracket provides a constructive environment for net-interest-margin stabilization across the underlying bank holdings. Nevertheless, near-term earnings revisions remain uncertain as markets price in potential rate cuts later in 2026.