New ETF Based on Chart Patterns

The PowerShares DWA Technical Leaders Portfolio (PDP) is one new Exchange Traded Fund (ETF) in the street that is being billed as the first ETF implementing a process based on purely technical, rather than fundamental, factors. So, instead of talking to executives, analyzing financial statements and projecting items such as revenue and cash flow, the new fund will try to beat the market by judging chart patterns based on price movements.

PDP tracks an index of some 100 stocks created by the Richmond, VA -based Dorsey Wright & Associates. That benchmark is built around the firm's expertise in technical research for institutional investors.

According to Dorsey Wright, their back-tested data indicates its index would've beaten the S&P 500 index by an average annualized 8.76 percentage points from 2001-2006. However, last year, the index trailed the general market by more than 4 percentage points.

The index had 72.83% of its assets in large-cap stocks entering 2007, with a slight leaning to value names. Another 14.37% was weighted in midcaps. The ETF has an expense ratio of 0.60%.