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Click Here For This Week’s  SEAF Model “Rainbow Charts” Update
Financials and Industrials Maintain Top SEAF Rankings
Conclusion, Investment Implications, Strategy

The SEAF Model has retained the previous week’s top-three ranking for Financials (XLF) and Industrials (XLI) this week while re-adding Communication Services, the latter which previously held a top-three SEAF Ranking for five of the past seven weeks.  Meanwhile, Energy, which had a top-three ranking a week ago, collapsed back to the worst-ranked sector this week due to its 11 ranking in the Trading category.


Beyond The SEAF Model Video: This Week’s Sector Themes

This weekly video by Jack Kosar goes into more detail on the latest SEAF Model data via a heat map that shows where sector-related assets are going, and where they are leaving, in the 11 Sector SPDR ETFs, and also dissects our SEAF “Rainbow Charts” which display the past 12 months of Favored, Neutral, or Avoid rankings in several key market sectors. 

From The Video: This Week’s Major Themes
  • Money aggressively moving into Industrials in the Trading and Tactical time periods.
  • Money aggressively moving into Financials in the Tactical and Strategic time periods.
  • Money aggressively moving back out of Energy in the Trading and Strategic time periods.

The SEAF Model: Current Signals & Related Performance

Editor’s Note:  These are the latest specific trading signals generated by our SEAF Model, which also includes a rules-based money management component.  The backtested performance data below is based on trading a predetermined amount of assets with an equal allocation of those assets across the top three Rankings.  The model is updated once per week, on the weekend, and any rebalancing takes place on the market opening the following Monday morning.  This is the recommended way to invest via the SEAF Model.  Contact us for any additional clarification.S

In the SEAF Model Graphic below, the Ranking column sorts the entire table of 11 sector ETFs according to the sum of rankings in the Trading (weekly), Tactical (monthly), and Strategic (quarterly) categories, from largest inflows to largest outflows.  The premise of the model is to invest in the sectors that the money is going into and to avoid the sectors the money is coming out of.  

The lower the Ranking number, the stronger the trend of asset flows going into that sector.  The top two sectors in each category, according to a positive change in inflows, are highlighted in green.  The top two sectors in each category, according to a negative change in outflows, are highlighted in red.

The SEAF Model

Click the table to make it larger

The latest data indicate a multi-timeframe trend of asset inflows into Financials and Industrials.  This is where the money is currently going in the sector space.

The latest data also indicate a multi-timeframe trend of asset outflows out of Energy.  This is where the money is coming from.


SEAF Model Individual Sector Charts (“Rainbow Charts”)

The charts below display the weekly SEAF Model Ranking Scores over the previous 12 months for the strongest and weakest sectors through September 12th.  The line in the upper panel displays these weekly scores within the context of being Favored (3-15, green)Neutral (16-24, yellow), or Avoid (25-33, red) and also displays the trend of asset flows as the money moves in and out of these sectors.  The lower panel plots the corresponding weekly relative performance chart of that particular sector versus the S&P 500 (SPY).

Industrials: XLI

Economically sensitive Industrials (XLI) is the SEAF Model’s top-ranked sector this week with a Ranking score of 9.  The green highlights in Chart 1 below show that Industrials moved to a Favored Ranking on Jan 13th.  The chart also shows that XLI has outperformed the benchmark S&P 500 (SPY, lower panel) by 4% since Industrials bottomed out according to the SEAF Model on Jan 6th (upper panel).  As long as Industrials retains its Favored ranking according to SEAF, recent relative outperformance by XLI versus SPY is likely to continue.

Chart 1

Financials (XLF)

Cyclical Financials (XLF) is the SEAF Model’s second-ranked sector this week with a Ranking score of 12.  The rightmost green highlights in the upper panel of Chart 2 below show that Financials moved into Favored status on Jan 14th as the daily relative performance chart of XLF versus the benchmark S&P 500 (SPY, lower panel) responded with sharp relative outperformance.  The green highlights in the middle of the chart show that a previous sustained period of Favored status according to the SEAF Model between Oct 11th and Dec 9th coincided with 5% of relative outperformance by Financials versus the broad market.  Financials must retain its Favored status for recent relative outperformance by XLF to continue.  

Chart 2

Communication Services: XLC

Economically sensitive Communication Services (XLC) is the SEAF Model’s third-best-ranked sector this week with a Ranking score of 14.  The green highlights in the upper panel of Chart 3 below show that Communication Services edged back into Favored status late last week, and also that this sector’s previous extended stay in Favored status between Nov 12th and Jan 13th coincided with 3% of relative outperformance between XLC and the S&P 500 (SPY, lower panel).  Another sustained period of Favored status by Communication Services is necessary to fuel another significant period of relative sector outperformance.

Chart 3