Industrials Jumps Right Back Into The Top Three

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 for the third consecutive week and is joined by cyclical Materials, which has maintained it current Favored status since Jan 5th, and economically sensitive Industrials, which has been one of the top-three ranked sectors for nine of the past ten weeks.  These three sectors typically outperform in a cyclical, inflation-aware, growth-accelerating economic environment.  At the other end of the spectrum, Consumer Discretionary and Technology are currently the two worst-ranked sectors.

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 in All time periods.
  • Money is aggressively moving into Communication Services and Technology in the Trading time period.
  • Money is aggressively moving out of Consumer Discretionary 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 1-29-2026. 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 Consumer Discretionary and Technology 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).

Energy (XLE)

Defensive Energy (XLE) is the SEAF Model’s top-ranked sector again this week with a best-possible Ranking score of 3, up from 5 a week earlier and from 8 and 12 three and four weeks ago.  The upper panel of 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.  The lower panel shows that, since Energy bottomed out in Avoid status in mid-December, XLE has outperformed the benchmark S&P 500 (SPY) by 15%.  On a trailing 12-month basis, according to ssga.com, XLE is currently the fourth-best-performing Sector SPDR ETF (from eighth-best a week ago), rising by 13.2% while underperforming the State Street® SPDR® Portfolio S&P 500® ETF (SPYM) by 1.2%.

Chart 1

Materials  (XLB)

Cyclical Materials (XLB) is the SEAF Model’s second-ranked sector this week with a Ranking score of 13, up from 16 a week earlier.  The upper panel of Chart 2 below shows that, with the exception of a few days during the third week of January, Materials has actually been in Favored status since Jan 5th.  However, this is the first week that Materials has been able to break into the top three best-ranked sectors during this period.  The lower panel shows that XLB has outperformed the benchmark S&P 500 (SPY) by 7.0% since Jan 5th.  On a trailing 12-month basis, according to ssga.com, XLB is the sixth-best-performing Sector SPDR ETF, rising by 10.2%, while underperforming the State Street® SPDR® Portfolio S&P 500® ETF (SPYM) by 4.2%.

Chart 2

Industrials (XLI)

Economically sensitive Industrials (XLI) is the SEAF Model’s third-ranked sector this week, with a Ranking score of 13, equaling its score of a week earlier.  The upper panel of Chart 3 below shows that Industrials initially moved into Favored status on Nov 21st, as shown in the upper panel of Chart 2 below, and has been one of the top-three ranked sectors according to SEAF for nine of the past ten weeks beginning on Dec 1st.  The lower panel shows that XLI has outperformed the benchmark S&P 500 (SPY) by 9.0% during this period.  On a trailing 12-month basis, according to ssga.com, XLI is the second-best-performing Sector SPDR ETF, rising by 18.7% while outperforming the State Street® SPDR® Portfolio S&P 500® ETF (SPYM) by 4.4%.

Chart 3