Energy Retains The Previous Week’s Favored Status

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, economically sensitive Energy (XLE) retains its top-three SEAF Model status, while adding defensive Health Care (XLV) and cyclical Financials (XLX) to the top three.  At the other end of the spectrum, economically sensitive Technology (XLK), cyclical Real Estate (XLRE), and defensive Utilities (XLU) are the three bottom-ranked sectors.  The past year has been characterized by wildly vacillating sector rotation, which we believe has been driven in large part by day-to-day inconsistency in economic policy coming out of the White House concerning tariffs, interest rate policy (including the continued independence of the Federal Reserve), global trade, and other issues, most recently the potential invasion of Greenland.  This instability has forced managers to be extremely cautious and frenetic in their positioning, which, although it has not adversely affected the SEAF Model’s performance, has led to increased trading activity.

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 provide a daily 12-month lookback at SEAF’s previous Favored, Neutral, and Avoid rankings. 

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

Data through 1-22-2026. Click the table above to enlarge

The latest data indicate a multi-timeframe trend of asset inflows into the Energy 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 Technology 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 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).

Energy (XLE)

Defensive Energy (XLE) is the SEAF Model’s top-ranked sector this week with a Ranking score of 5, steadily rising from scores of 8 and 12 one and two weeks earlier.  Chart 1 below shows that Energy moved back into Favored status on Jan 13th after spending most of the past 12 months in SEAF Avoid status, with only two short-lived forays into Favored status in March and in November/December. On a trailing 12-month basis, according to ssga.com, XLE is the eighth-best/fourth-worst-performing Sector SPDR ETF, rising by 6.7%, while underperforming the State Street® SPDR® Portfolio S&P 500® ETF (SPYM) by 6.4%.

Chart 1

Health Care (XLV)

Defensive Health Care (XLV) is the SEAF Model’s second-ranked sector this week with a Ranking score of 8, up significantly from 17 a week earlier to reestablish its top-three SEAF status of two weeks ago.  Chart 2 below shows that, with the exception of a brief period in late December, Health Care has maintained a Favored SEAF status since Oct 3rd while outperforming the broad market S&P 500 (SPY) by 6.0%.  On a trailing 12-month basis, according to ssga.com, XLV is the fifth-best-performing Sector SPDR ETF, rising by 9.3%, while underperforming the State Street® SPDR® Portfolio S&P 500® ETF (SPYM) by 3.8%.

Chart 2

Financials (XLF)

Cyclical Financials (XLF) is the SEAF Model’s third-ranked sector this week with a Ranking score of 10, up from a very weak 33 a week earlier and back into its top-three SEAF status of two weeks ago.   The upper panel of Chart 3 below shows how wildly Financials’ SEAF scores have fluctuated in January, which we believe has been largely driven by day-to-day changes in tariffs and other geopolitical decisions (such as the invasion of Greenland, etc.) emanating from the White House.  Financials must remain in Favored SEAF status for a sustained period to fuel a new trend of relative outperformance versus the benchmark S&P 500 (SPY).  On a trailing 12-month basis, according to ssga.com, XLF is the second-worst-performing Sector SPDR ETF, rising by just 4.7% while underperforming the State Street® SPDR® Portfolio S&P 500® ETF (SPYM) by 8.4%. 

Chart 3