Weekly Commentary — May 10, 2026
⚠️ Not financial advice. This is auto-generated each week by Claude (Anthropic's AI model). Brian Beals is not a registered investment advisor, and Claude is not licensed to provide personalized financial advice. The screener is a research and methodology demo, not a recommendation system. Past performance does not predict future results. Do your own research before making any investment decisions.
By Brian Beals. Methodology and code: github.com/brianbeals/sector-rotation-screener. Commentary generated by Claude (claude-sonnet-4-5).
What the screen said this week
The screener classified the economy as mid-cycle based on industrial production growing +0.7% year-over-year—positive but below 4%—with an upward-sloping trend (+0.49). That combination typically reflects steady expansion without overheating. Under this rule set, mid-cycle assigns high cycle-fit scores to economically sensitive sectors like Technology and Communications, and lower scores to defensive names.
Technology (XLK) topped the composite at 91.3, earning a Buy signal. It scored perfectly on cycle fit (100.0), received strong marks for relative strength (93.3, +17.43% over three months), and registered favorable seasonality (80.0). Communications (XLC) also crossed the Buy threshold at 65.5, driven by maximum cycle fit and very high seasonality (86.6), though its relative strength was weaker (23.7, -5.76% trailing three months) and carries a thin-sample warning for the seasonality component.
Four sectors fell into Avoid territory (composite ≤ 40): Consumer Staples, Utilities, Financials, and Healthcare. All four showed poor recent relative strength, with Healthcare posting the weakest three-month performance at -15.74%. The mid-cycle classification penalized defensive sectors (Staples, Utilities, Healthcare) with lower cycle-fit scores (35.0), while Financials' Avoid signal stemmed primarily from its trailing RS rank of 10.3.
Things worth noticing
Communications presents an unusual profile: it qualified for a Buy signal thanks to strong seasonality and perfect cycle alignment, yet its three-month relative strength is negative (-5.76%) and its RS component score sits at only 23.7. This illustrates how the composite can aggregate conflicting inputs—recent price underperformance versus favorable macro and calendar patterns. The methodology also flags Communications seasonality as based on a "thin sample," a reminder that shorter ETF histories reduce the statistical confidence of calendar effects.
Real Estate and Energy landed near the middle (53.4 and 50.4) with Hold signals. Both received mid-range cycle scores (50.0), meaning the mid-cycle phase neither favors nor penalizes them under this rule set. Their composite rankings hinged on the interplay of modest seasonality and relative strength; neither broke above the 65 Buy threshold or fell below the 40 Avoid line.
The backtest disclosure is particularly notable this week: over the 15-year window, the strategy returned +224.93% versus +595.59% for SPY, meaning this rule set underperformed buy-and-hold by a wide margin after accounting for 10 basis points per trade. That historical result is a property of these specific thresholds, weights, and rebalancing logic—not a statement about sector rotation in general or the future utility of the screen.
Methodology reminder
The composite score is a weighted sum: 30% seasonality + 30% cycle fit + 40% relative strength. Signals trigger at fixed thresholds (Buy ≥ 65, Avoid ≤ 40). The backtest controls for lookahead bias by using FRED ALFRED point-in-time data vintages, ensuring macro indicators reflect only information available on each historical decision date. Performance figures describe how this particular rule set behaved in the past, not how markets or sectors will behave going forward.