The underlying index of this ETF is based on the Dorsey Wright & Associates methodology for identifying and tracking leading stocks. They use technical analysis to determine which sectors are in favor and drill down to select those stocks within the favored sectors that are the strongest performers in the market. Point & Figure chart patterns, Bullish percents, relative strength, and other measures are used for these purposes. Tom Dorsey of Dorsey Wright & Associates has written possibly the best book on this approach, "Point & Figure Charting: The Essential Application for Forecasting and Tracking Market Prices":

http://www.amazon.com/Point-Figure-Chart...

Tom and associates have also written a practical book on trading, "Tom Dorsey's Trading Tips: A Playbook for Stock Market":

http://www.amazon.com/Tom-Dorseys-Tradin...

The Dorsey Wright website, http://dorseywright.com contains a wealth of information about the markets, funds, individual stocks, and their excellent approach to trading/investing. They post a weekly video review and assessment of the markets. Associates daily contribute articles on market conditions and trends. A message board is provided for site subscribers to discuss various topics; contributors include professional money managers/financial advisors. They have a strong database with scanning capability and idea generation facility. I recommend any traders/investors to check out the site.

Other than my own paid subscription to the website, I am in no way affiliated with Dorsey Wright and the opinions that I have expressed are all my own.