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, Utilities, & Discretionary Ranked 1-2-3 Again This Week
Conclusion, Investment Implications, Strategy

The SEAF Model has retained Technology (XLK), Utilities (XLU), and Consumer Discretionary (XLY) as the three best-ranked sectors again this week, while also retaining the previous four weeks’ mostly-positive, risk-on bias.  Note that Utilities can now be construed as either a defensive or offensive sector due to the energy demands that AI has thrust upon the market.  At the other end of the spectrum, economically sensitive Energy (XLE) and cyclical Financials (XLF) are the two worst-ranked sectors this week.

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 our SEAF Rainbow Charts and a heat map that provide more color and detail on where sector-related assets are going, and where they are coming from, in the 11 Sector SPDR ETFs.   Our Rainbow Charts highlight SEAF’s past 12 months of Favored, Neutral, and Avoid rankings. 

From The Video: This Week’s Major Themes
  • Money is aggressively moving into Technology in All time periods.
  • Money is aggressively moving into Health Care in the Trading time period.
  • Money is aggressively moving out of Energy and Financials 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 Technology 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 Energy and Financial 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

Offensive Technology (XLK) is once again the SEAF Model’s top-ranked sector this week with a Ranking score of 4, up slightly from a 7 ranking a week earlier.  Technology has been one of the top three-ranked sectors for 21 of the past 24 weeks beginning on Apr 24th, and has been the top-ranked sector 17 times during this period.  Meanwhile, Chart 1 below shows that XLK has outperformed the benchmark S&P 500 (SPY, lower panel) by 5% since returning to Favored status on Sep 9th .  Year-to-date (YTD), according to sectorspdrs.com, XLK is the best-performing Sector SPDR ETF, rising by 22.5% while outperforming SPY by 8.3%. 

Chart 1

Utilities  (XLU)

Defensive Utilities (XLU) is again the SEAF Model’s second-ranked sector this week with a Ranking score of 13, up slightly from a 14 ranking a week earlier.  The green highlights in Chart 2 below show that Utilities moved back into Favored status on Sep 23rd, and that its previous period of favored status between Jly 9th and Aug 26th coincided with 2% of relative outperformance by XLU versus the benchmark S&P 500 (SPY, lower panel).  Year-to-date, according to sectorspdrs.com, XLU  is currently the third-best-performing Sector SPDR ETF, rising by 17.5% while outperforming the S&P 500 (SPY) by 3.3%. 

 

Chart 2

Consumer Discretionary (XLY)

Cyclical Consumer Discretionary (XLY) is the SEAF Model’s third-best-ranked sector this week with a Ranking score of 13, up slightly from a 14 ranking a week earlier, after initially moving into Favored status on Sep 4th.  Although XLY has just been a relative performer versus the benchmark S&P 500 (SPY) since then, not shown is that XLY is currently challenging its previous December 2024 all-time high at 240.28.  If this level is significantly broken to the upside, it is likely to spur more buying, which will improve its relative performance versus the benchmark S&P 500 (SPY).  Year-to-date, according to sectorspdrs.com, XLY is the seventh-best (or fifth-worst) performing Sector SPDR ETF, rising by 6.0% while underperforming SPY by 8.2%. 

Chart 3