Weekly-updated PDF of all SEAF Rainbow Charts:  Click the link below to download a PDF of this new addition to our research services.

Click Here For This Week’s SEAF Model “Rainbow Charts” Update
Technology Ranked #1 For 5th Consecutive Week
Conclusion, Investment Implications, Strategy

The SEAF Model graphic below shows that economically sensitive Technology (XLK) and Communication Services (XLC) are the first and second-ranked sectors according to SEAF this week, with cyclical Consumer Discretionary (XLY) coming in third.  All three are generally seen as “risk on” sectors that are indicative of risk appetite.  At the other end of the spectrum, cyclical Financials (XLF) and defensive Health Care (XLV) are the two worst-ranked sectors.  

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 and Communication Services in All time periods.
  • Money aggressively moving into Energy in the Trading time period.
  • Money aggressively moving out of Industrials in the Trading time period.
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 from Financials and Health Care.  This is where the money is coming from.

SEAF Heat Map

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 again the SEAF Model’s top-ranked sector this week with a Ranking score of 4.  Technology has been SEAF’s top-ranked sector for six of the past seven weeks.  Chart 1 below shows that Technology moved back into top-three status according to SEAF on Apr 24th (upper panel) for the first time since Feb 20th, and has coincidentally outperformed the S&P 500 (SPY, lower panel) by 7.0% during this period.  As long as Technology retains its current Favored status, recent outright strength and relative outperformance versus SPY are likely to continue.

Chart 1

Communication Services (XLC)

Economically sensitive Communication Services is the SEAF Model’s second-ranked sector this week with a Ranking score of 7.  Communication Services has been a top-three-ranked sector according to SEAF for six of the past eight weeks.  Chart 2 below shows that Communication Services initially moved into Favored status on Apr 23rd  (upper panel) while XLC has slightly outperformed the S&P 500 (SPY, lower panel), by 1%.  Although Communication Services has not yet outperformed by a meaningful degree, history suggests that the longer this sector retains its current Favored status, the more likely that XLC will generate a significant period of relative outperformance versus SPY.

Chart 2

Consumer Discretionary (XLY)

Cyclical Consumer Discretionary is the SEAF Model’s third-ranked sector this week with a Ranking score of 15, which is right at the weak edge of the model’s Favored status.  Consumer Discretionary has been a top-three-ranked sector according to SEAF for three of the past six weeks, alternating between being “in” and “out” during this period.  Chart 3 below shows that Consumer Discretionary initially moved into Favored status on May 8th (upper panel), but has only managed to be a relative performer versus the benchmark S&P 500 (SPY) since then.  This due at least in part due to the fact that it has remained in the lower (weaker) half of Favored status during this period.

Chart 3