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
Offensive Technology,  Defensive Utilities Retain Top-Three Status
Conclusion, Investment Implications, Strategy

The SEAF Model retained the previous week’s long/overweight bias in offensive Technology (XLK) and in defensive Utilities (XLU) while adding economically sensitive Communication Services (XLC) as a new overweight.  We believe the frenetic rotation at the top of the SEAF Model this year, with the recent exception of Technology which has retained its top-three status for 15 of the past 16 weeks, is emblematic of investor uncertainty as tariffs, interest rates, and geopolitical alliances continue to get sorted out.  At the other end of the spectrum, defensive Health Care (XLV) remains buried in Avoid status, where it has resided since May 1st.

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 (XLC), and Utilities in All time periods.
  • Money aggressively moving out of  Health Care (XLV), Financials (XLF), and 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, Communication Services, and Utilities sectors.

The latest data also indicate a multi-timeframe trend of asset outflows from the Health Care, Financials, and Energy sectors.  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 the SEAF Model’s top-ranked sector this week with a Ranking score of 5.  Technology has been one of the top three-ranked sectors for 15 of the past 16 weeks, beginning on Apr 24th, and has been the top-ranked sector 11 times during this period.  The lower panel of Chart 1 below shows that XLK has simultaneously outperformed the benchmark S&P 500 (SPY, lower panel) by 11.0%.  Year-to-date (YTD), according to sectorspdrs.com, XLK  is the second-best performing Sector SPDR ETF, rising by 14.4% while outperforming SPY by 5.7%. 

Chart 1

Communication Services  (XLC)

Economically sensitive Communication Services (XLC) is the SEAF Model’s second-ranked sector this week with a Ranking score of 6. The upper panel of Chart 2 below shows that Communication Services initially moved back into Favored status on August 1st, for the first time since Jly 10th.  Year-to-date, according to sectorspdrs.com, XLC  is the fourth-best performing Sector SPDR ETF, rising by 11.2% while outperforming the S&P 500 (SPY) by 2.6%. 

Table 2

Utilities (XLU)

Defensive Utilities (XLU) is the SEAF Model’s third-ranked sector this week with a Ranking score of 8.  Utilities has been one of the four best-ranked sectors according to SEAF for the past five weeks, initially moving into Favored status on Jly 9th as shown in the upper panel of Chart 3 below.  The lower panel shows that XLU has coincidentally outperformed the benchmark S&P 500 (SPY) by 3% since then.  Year-to-date,  according to sectorspdrs.com, XLU is the third-best performing Sector SPDR ETF, rising by 13.9% while outperforming SPY by 5.2%.

Chart 3