Sector Rotation Positioned For More Market Weakness

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

Conclusion, Investment Implications, Strategy

This week, defensive Health Care (XLV) and Energy (XLE) are again the two top-ranked sectors of the S&P 500, while Utilities (XLU) moves into the #3 spot. Utilities has historically been considered a defensive sector but now, due to AI-related demand for more energy, is being viewed by many as a an offensive sector.  At the other end of the spectrum, offensive Communication Services (XLC), Consumer Discretionary (XLY), and Technology (XLK) are three of the four worst-ranked sectors.  Collectively, these latest data suggest that the market is positioned for more broad market weakness.

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 provides more color and detail on where sector-related assets are going and where they are coming from across the 11 Sector SPDR ETFs, which together comprise the S&P 500.   Our Rainbow Charts highlight SEAF’s previous 12 months of Favored, Neutral, and Avoid rankings. 

From The Video: This Week’s Major Themes
  • Money is aggressively moving into Health Care and Energy in All time periods (same as a week earlier).
  • Money is aggressively moving into Utilities in the Trading time period.
  • Money is aggressively moving out of Consumer Discretionary and Technology in the Trading and Tactical 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.

Data through 11-20-2025. Click the table above to enlarge

The latest data indicate a multi-timeframe trend of asset inflows into the Health Care and Energy 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 Consumer Discretionary 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 October 16th.  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).

Health Care (XLV)

Defensive Health Care (XLV) is again the SEAF Model’s top-ranked sector this week with a Ranking score of 3, equaling its score a week ago and the best Ranking Score possible.  Health Care has been one of the top-three-ranked sectors for six of the past seven weeks, beginning on Oct 13th.  The upper panel of Chart 1 below shows that XLV has maintained a Favored SEAF status since Oct 2nd, while the lower panel shows that XLV has outperformed the benchmark S&P 500 (SPY) by 10% since then.  Year-to-date, according to sectorspdrs.com, Health Care is the fifth-best-performing Sector SPDR ETF, rising by 12.4% while outperforming SPY by 0.1%. 

Chart 1

Energy (XLE)

Defensive Energy (XLE) is the SEAF Model’s second-ranked sector this week with a Ranking score of 9, from 7 a week earlier.  The current Nov 7th move to Favored status is the first time since Jun 20th, and before that, since Apr 1st.  The lower panel shows that XLE has outperformed the S&P 500 (SPY) by as much as 9% since Nov 7th before retracting to 5% through the end of last week.  Year-to-date (YTD), according to sectorspdrs.com, XLE is the fifth-worst-performing Sector SPDR ETF, rising by 4.4% while underperforming SPY by 7.9%.

Chart 2

Utilities (XLU)

Utilities (XLU) is the SEAF Model’s third-ranked sector this week with a Ranking score of 10, up from 19 a week earlier, and has been one of the top three best-ranked sectors for six of the past nine weeks.  The green highlights in Chart 3 below show that Utilities regained Favored status on November 17th.  The longer that XLU can maintain its Favored status,  the more likely it is that Utilities will outperform the broad market S&P 500 (SPY) in the weeks ahead.  Year-to-date, according to sectorspdrs.com, XLU  is currently the second-best-performing Sector SPDR ETF, rising by 16.5% while outperforming the S&P 500 (SPY) by 4.2%. 

Chart 3