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Technology Falls To #3 Amid A Surge In Defensive Utilities
Conclusion, Investment Implications, Strategy

The SEAF Model made a significant change last week as defensive Utilities (XLU) moved into the top-ranked sector slot, pushing economically sensitive Technology (XLK) into the third best ranked spot after spending nine of the previous eleven weeks at number one. Meanwhile, also economically-sensitive Industrials (XLI) moved into the second-best slot this week.  At the other end of the spectrum, defensive Health Care (XLV) and Consumer Staples (XLP) are again the two worst-ranked sectors 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 Utilities in the Trading and Tactical time periods.
  • Money moving into Industrials in All Trading time period.
  • Money aggressively moving into Technology in the Tactical 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.

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 Utilities and  Technology.  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 Health Care.  This is where the money is coming from.

SEAF Heat Map

SEAF Heat Map: 07-14-2025

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).

Utilities (XLU)

Defensive Utilities (XLU) is the SEAF Model’s top-ranked sector this week with a Ranking score of 9.  The upper panel of Chart 1 below shows that Utilities moved back into Favored status according to SEAF on Jly 9th.  A low SEAF Ranking score means that, on a relative basis, there is a lot of money going into a specific sector, and expanding asset flows is a key driver of outright and relative performance.  Accordingly, the green rectangle shows that a sustained period of a Favored ranking in Utilities between Feb 7th and May 13th coincided with 7% of relative outperformance by XLU versus SPY.

Chart 1

Industrials  (XLI)

Economically sensitive Industrials (XLI) is the SEAF Model’s second-ranked sector this week with a Ranking score of 12.  The upper panel of Chart 2 below shows that Industrials most recently moved back into Favored status according to SEAF on Jun 24th.  The lower panel shows that XLU has coincidentally outperformed the benchmark S&P 500 (SPY) by 2% since then.  The chart also shows that Utilities’ previous move into Favores status between May 14th and Jun 6th coincided with 1% of relative outperformance by XLI over SPY.

Chart 2

Technology: XLK

Economically sensitive Technology (XLK) is the SEAF Model’s third-ranked sector this week with a Ranking score of 12, which immediately follows an extended period beginning on May 5th  that Technology was the top-ranked sector for nine of the previous 11 weeks.  Moreover, since Apr 24th, when Technology initially moved into a Favored ranking, Chart 3 below shows that XLK has coincidentally outperformed the benchmark S&P 500 (SPY) by 13%.  Although Technology fell back in the SEAF rankings this week, as long as it retains its current Favored status, recent outright strength and relative outperformance versus SPY are likely to continue.

Chart 3