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
Market Uncertainty Persists As Investors Swing From Defensive Back To Offensive
Conclusion, Investment Implications, Strategy

The SEAF Model made yet another atypical all-at-once wholesale shift right back into an offensive alignment last week, with Technology (XLK), Consumer Discretionary (XLY), and Communication Services (XLC) as the top three sectors, right on the heels of an all-at-once shift into a defensive alignment (Utilities, Health Care, and Consumer Staples) the week before.  This kind of back-and-forth behavior has become prominent over the past month or so as investors collectively appear to be nervously preparing for the inevitable next corrective decline, as the S&P 500 (SPX) has risen by 34% since the April lows, but has been equally quick to abandon that approach every time the major indexes make another new high.  The only sector that has been mostly immune to this behavior has been Technology (XLK), as investors appear to be betting that the Artificial Intelligence (AI) trade may be the only relatively safe place to be, as indecision with tariffs, interest rates, and geopolitics has made it virtually impossible to project business conditions into year-end.

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 is aggressively moving into Financials and Consumer Discretionary in the Trading and Tactical time periods.
  • Money is aggressively moving out of Utilities in the Trading time period.
  • Money is aggressively moving out of  Consumer Staples and Health Care 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 the Communication Services sector.  This is where the money is currently going in the sector space.

The latest data also indicate a multi-timeframe trend of asset outflows from the Consumer Staples and Health Care 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 10.  Technology has been one of the top three-ranked sectors for 17 of the past 19 weeks, beginning on Apr 24th, and has been the top-ranked sector 13 times during this period.  The green highlights in Chart 1 below show that Technology moved back to Favored status last week following a brief one-week foray into Neutral status a week earlier.  The green highlights also show that Technology spent an extended period in Favored status between Apr 18th and Aug 19th, while XLK coincidentally outperformed the benchmark S&P 500 (SPY, lower panel) by 12%.  Year-to-date (YTD), according to sectorspdrs.com, XLK is the third-best-performing Sector SPDR ETF, rising by 12.9% while outperforming SPY by 3.0%. 

Chart 1

Consumer Discretionary: XLY

Cyclical Consumer Discretionary (XLY) is the SEAF Model’s second-best-ranked sector this week with a Ranking score of 11.  The rightmost green highlights in Chart 2 below point out that Consumer Discretionary moved back into Favored status on Aug 25th, after residing in Neutral/Avoid status since mid July.  However, it would take a sustained Favored rating, as previously occurred between late August 2024 and mid-January 2025 and coincided with 14% of relative outperformance by XLY versus the benchmark S&P 500 (SPY, lower panel), to fuel another protracted period of relative outperformance in Consumer Discretionary.  Year-to-date (YTD), according to sectorspdrs.com, XLY is the third-worst-performing Sector SPDR ETF, rising by 3.3% while underperforming SPY by 7.1%. 

Chart 2

Communication Services  (XLC)

Economically sensitive Communication Services (XLC) is the SEAF Model’s third-ranked sector this week with a Ranking score of 11, equal to Consumer Discretionary.  The upper panel of Chart 3 below shows that Communication Services initially moved back into Favored status on August 1st, while the lower panel shows that XLC has coincidentally outperformed the benchmark S&P 500 (SPY) by 4%.  Year-to-date, according to sectorspdrs.com, XLC  is the second-best-performing Sector SPDR ETF, rising by 15.1% while outperforming the S&P 500 (SPY) by 5.2%. 

Chart 3