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
2025’s Erratic Sector Musical Chairs Continues
Conclusion, Investment Implications, Strategy

The SEAF Model retained the previous week’s mostly-positive, risk-on bias this week by retaining Consumer Discretionary (XLY) and adding Communication Services (XLC), which are the two strongest sectors year to date, while also adding defensive Health Care (XLV), which is the weakest sector YTD but has risen by 9.0% over the past five weeks.  Also atypical and noteworthy is that Financials (XLF), the second strongest sector a week ago according to SEAF, is the weakest sector in the Trading time frame this week as the game of sector musical chairs continues, driven by a number of factors including inconsistent messaging surrounding tariffs, a slowing economy, and the direction of interest rates amid recent threats to the independence of the Federal Reserve.  At the other end of the spectrum, economically sensitive Energy and defensive Consumer Staples are the two worst-ranked sectors this week. 

Year to date, the SEAF Model is trailing the S&P 500 by 0.5% but with a lower maximum drawdown, lower standard deviation, and lower beta.

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 Technology in the Trading and Strategic time periods.
  • Money is aggressively moving into Health Care in the Trading and Tactical time periods.
  • Money is aggressively moving out of Financials 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 the Technology and Health Care sectors.  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 Energy sector.  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 18 of the past 21 weeks, beginning on Apr 24th, and has been the top-ranked sector 14 times during this period.  The green highlights in Chart 1 below show that Technology moved back into Favored status last week following a brief 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%, so we would expect that a similar extended stay in Favored status this time would produce a similar result.  Year-to-date (YTD), according to sectorspdrs.com, XLK is the second-best-performing Sector SPDR ETF, rising by 16.5% while outperforming SPY by 4.6%. 

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, down slightly from its score of 13 a week earlier, and has been one of the top-three-ranked sectors for the past three weeks.  A sustained period of time in Favored status, as occurred between late October 2024 and Jan 10th while XLY outperformed SPY by 13%, would be necessary for recent relative outperformance by Consumer Discretionary to continue.  Year-to-date (YTD), according to sectorspdrs.com, XLY is the seventh-best (or fifth-worst) performing Sector SPDR ETF, rising by 6.4% while underperforming SPY by 5.6%. 

Chart 2

Health Care (XLV)

Defensive Health Care (XLV) is the SEAF Model’s third-ranked sector this week with a Ranking score of 13.  Atypically, it is the second- and first-ranked sector in the Trading and Tactical time periods this week, and also the second-worst ranked in the Strategic time period.  This disparity indicates a quick jump up from the bottom of its overall Ranking score, where it has mostly resided since May.  However, it remains to be seen whether this is just another brief surge of assets in and out of Healthcare as occurred on August 21st, or if this one is sustainable like the February 25th to April 10th period earlier this year.  Year-to-date (YTD), according to sectorspdrs.com, XLV  is the worst-performing Sector SPDR ETF, rising by just 0.4% while underperforming SPY by 11.6%. 

Chart 3