(Commodities Weekly) The Energy Trade Is Unraveling 📉🐻

When we last checked in, Crude Oil futures were falling apart as they sliced through significant levels of support like butter. 

The breakdown wasn’t subtle. It was decisive and came alongside broad weakness in the entire commodity complex.

Now, the carnage is spreading.

This week, it’s not just energy commodities that are under pressure...

It’s also the stocks tied to them.

Let’s start with the equal-weight ratio of the Energy Sector vs. the S&P 500:

This ratio ($RSPG / $RSP) has been treading water in a sideways range for over two years. 

It has bounced from the same support level multiple times, but that level is now under serious threat. 

We’ve got a massive topping pattern on our hands. It's rounded, heavy, and on the verge of a confirmed breakdown.

One more leg lower, and Energy’s former leadership story gets completely erased.

But that’s just the beginning…

Small-cap energy stocks have already broken down relative to the Russell 2000:

Since last summer, the relative trend for small-cap energy ($PSCE / $IWM) has been making new multi-year lows. 

That’s not just weakness... It's relative destruction.

When small-caps lead to the downside, it often acts as a canary in the coal mine. 

It shows us where risk appetite is drying up. Right now, it’s drying up fast in energy.

The weight of the evidence is building:

• Crude Oil futures are below every major anchored VWAP.
• Small-cap energy stocks can’t catch a bid.
• Large-cap energy stocks are beginning to confirm our bearish bias.

This isn’t just a pullback. This is a potential structural rotation away from energy.

So, what’s the trade?

If you’re still long energy stocks, it might be time to reduce exposure or tighten stops. 

If you’re looking to get short, our Commodities Trade of the Week setup offers clearly defined levels against which to manage risk. 

It also has plenty of room to run on the downside.

We’re not saying energy is dead forever, but the trends are weakening fast.

There’s nothing bullish about multi-year breakdowns...

The bears are back in control.

Are you taking advantage of it with us? Let us know what you think.

Commitment of Traders Highlights

• Commercial hedgers added over 600 contracts to their net-long Bitcoin position. This is a brand-new record net-long.
• Commercials added over 26,000 contracts to their net-long Soybean Meal position. This is their largest net-long position on record.
• Commercial hedgers trimmed over 2,000 contracts from their largest net-short Japanese Yen position ever. 

👉 Click here to download the All Star Charts COT Heatmap

Commodities Trade of the Week

This week, we're outlining the $17.5B integrated oil & gas stock, Coterra Energy $CTRA.

The Houston-based company operates in the Permian Basin in West Texas, the Marcellus Shale in Pennsylvania, and the Anadarko Basin in Oklahoma.

Price has fallen by over 30% since it peaked in 2022.

This is the kind of long-term downside momentum we're looking to ride.

The stock has carved out a textbook distribution pattern. We're looking to get short if and when the bears put the finishing touches on this top.

Here's how we're trading CTRA👇