Conclusion, Investment Implications, Strategy

The SEAF Model exited it’s March 6th long/overweight signals in the Energy Select Sector SPDR Fund (XLE) and in the Industrial Select SectorPreview (opens in a new tab) SPDR Fund (XLI) as of the close yesterday.

The Energy Sector (XLE) declined by 11.4% outright while underperforming the S&P 500 (SPY) by 7.9%.  The Industrial Sector (XLI) declined by 6.2% outright while underperforming the S&P 500 (SPY) by 2.6%

Editor’s Note: Since December, investor asset flows have been very quickly shifting from sector to sector as indicated by the SEAF Model.  The is very atypical if not unprecedented market behavior for SEAF since its inception.  For example, in 2022 the average length of a SEAF signal was about 6 weeks.  Thus far in 2023, the average length has been less than half that.  We believe it indicates temporary investor uncertainty about where the market and the economy it represents are headed following a late January major bullish trend change in the S&P 500 (SPX), accompanied by extremely volatile interest rates and then the current banking crisis.  The strength of the SEAF Model is that it follows the money around  the S&P 500 via the 11 Sector SPDR ETFs.  We believe these are temporary market conditions, but right now the market doesn’t know where to go — it’s in offensive Technology one week and defensive Health Care the next – and it has rendered the SEAF Model ineffective this quarter.