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Offensive Tech, Comm Services Maintain Top SEAF Rankings Again This Week
Conclusion, Investment Implications, Strategy

The SEAF Model graphic below shows that offensive, “risk on” sectors Technology (XLK) and Communication Services (XLC) have maintained a top-three ranking for the second consecutive week.  New to the top three this week is cyclical Real Estate (XLRE), for only the second time since late October 2024.  We view this week’s Ranking scores as an indication of increasing risk appetite as the benchmark S&P 500 (SPX) has now risen by as much as 18% off its April low.  Another more subtle takeaway this week is that the top two sectors, XLK and XLC, have relatively high Ranking scores of 4 and 8, indicating a high level of conviction that there will be more upcoming strength in these areas.  At the other end of the spectrum, Energy (XLE) and Health Care (XLV) are the weakest sectors this week according to SEAF.

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 provides more detail on where sector-related assets are going, and where they are leaving, in the 11 Sector SPDR ETFs.  Jack also displays and discusses our SEAF “Rainbow Charts” highlighting SEAF’s past 12 months of Favored, Neutral, or Avoid rankings. 

From The Video: This Week’s Major Themes
  • Money aggressively moving into Technology, Communication Services, and Real Estate in All time periods.
  • Money aggressively moving out of  Financials and Health Care in the Trading and Tactical time periods.
  • Money continues to aggressively move out of  Energy in All 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.

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 where the money is going and to avoid the sectors where the money is coming out.  

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.

Click the table to make it larger

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

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

SEAF Heat Map

SEAF Heat Map: 05-05-2025

The SEAF Heat Map provides additional insight into the flows of the 11 Sector ETFs. Each time frame is independent, meaning the color spectrum for one period does not affect another. For example, the strongest inflow (dark green) for the trading week is separate from the strongest inflow for the tactical month.

The heat map visually represents the spectrum of inflows and outflows, with green indicating inflows and red indicating outflows. The more extreme the flow, the darker the corresponding color—deep green for strong inflows and deep red for strong outflows. Flows closer to yellow indicate minimal percentage change.

This tool serves as an additional layer of information to help investors not only identify where sector flows are moving but also gauge the relative strength of those flows compared to their peers.

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).

Technology: XLK

Economically sensitive Technology (XLK) is the SEAF Model’s top-ranked sector this week with a very strong Ranking score of 4 due to it being the strongest sector in both the Trading and Tactical time frames and the second strongest sector in the Strategic time frame.  Technology jumped back into top-three status according to the SEAF Model on Apr 24th, for the first time since Feb 20th, and has maintained that status this week.  A closer look at Chart 1 below shows that Technology has been oscillating back and forth between Favored and Avoid status for most of the past year (upper panel), which is why XLK has been sideways to weaker versus the S&P 500 (SPY, lower panel) during this period.  It would take a sustained stay in Favored status to fuel an extended period of relative outperformance by Technology versus the broad market.

Chart 1

Communication Services (XLC)

Economically sensitive Communication Services is once again the SEAF Model’s second-best-ranked sector this week with a Ranking score of 8, an improvement over the previous week’s score of 11.  Communication Services moved back into top-three status according to the SEAF Model on Apr 24th, for the first time since Mar 6th.  Technology and Communication Services’ recent jump back into Favored status together represents an aggressive increase in risk appetite, especially with defensive Health Care simultaneously declining to the second-worst-ranked sector.  The longer XLK and XLC retain their Favored status, the more likely the current rebound in the US broad market will continue.

Chart 2

Real Estate: XLRE

Cyclical Real Estate is the SEAF Model’s third-ranked sector this week with a Ranking score of 10.  This is only the second time since Oct 24th, 2024 that Real Estate has been one of the three best-ranked sectors of the week, the other instance being the week ending Apr 17th.  Moreover, the last time that Real Estate had a Ranking score of 10 was on Aug 28th, 2024, so this is the first time that XLRE has shown any significant strength in more than eight months.  Real Estate will likely have to maintained a sustained Favored status to fuel a new, significant relative outperformance trend versus the broad market S&P 500 (SPY).

Chart 3