The Rotation No One Believes In

There are corners of the market so unloved that they start to develop their own weather. Energy has been living under one of those storm clouds.

For most of this bull market, the sector has been treated like the leftovers at a feast cooked by technology, consumer discretionary, and industrials.

Nobody wanted it. Nobody needed it. Nobody cared. 

Energy was too old, too boring, too cyclical, too messy. Meanwhile, anything with an AI heartbeat levitated.

But markets whisper their intentions long before the headlines catch up. Back at the end of August, those whispers grew louder. 

Our Equal Weight Energy Futures Composite compressed into one of the tightest volatility squeezes we’ve ever seen. 

Money managers pushed their largest net-short crude oil position in history. 

And short interest in the Energy Sector SPDR $XLE surged to multi-year highs, as if investors were trying to outdo one another in their disdain for the entire sector.

This is precisely the setup where big rotations begin.

In real bull markets, the laggards don’t stay buried. They catch up to the leaders. 

They surprise everyone who stopped paying attention.

It has taken a lot of time and patience, but that unwind is unfolding right now.

And when we walk through the charts, the message is unmistakable: Energy is the next great rotation.

Start with the Gold Rush International Oil & Gas Index, an equal-weight basket of the world’s largest global producers.

The Gold Rush International Oil & Gas Index has been coiling beneath a key Fibonacci retracement level for nearly a year, refusing to break down. 

Now it’s finally resolving higher and trading at the highest level since 2014. That opens the door to the Great Financial Crisis highs, and possibly beyond. 

The international energy stocks have been and continue to lead the sector.

This same structure is playing out in our Gold Rush Integrated Oil & Gas Index.

The Gold Rush Integrated Oil & Gas Index is an equal-weight basket of some of the biggest energy names on the planet, including ExxonMobil $XOM, Chevron $CVX, Shell $SHEL, and other titans. 

The price is decisively resolving a massive multi-year base and is trading at the highest level since 2014. This breakout shifts the path of least resistance higher for the foreseeable future.

These are the elephants of the energy complex, and they’re ripping higher. 

Yet, in relative terms, energy still sits in a deep drawdown versus the S&P 500. 

The Energy Sector SPDR $XLE has been sliding lower for years versus the S&P 500 $SPY, which is precisely why sentiment is so washed out.

But look closer... The momentum low - the real exhaustion point - occurred at the end of 2024. 

Ever since, the 14-day RSI has carved out a series of higher lows while the ratio has continued to make new lows. That’s a classic sold-out downtrend.

And it’s the kind of setup that almost always precedes a catch-up phase.

And if we zoom into the industry groups, the rotation is even more apparent.

The VanEck Refiners ETF $CRAK bottomed versus the S&P 500 $SPY at the exact same moment momentum turned in the XLE/SPY ratio.

Since CRAK/SPY bottomed late last year, the ratio has been building a textbook bearish-to-bullish reversal pattern. This base is breaking out to fresh 52-week highs. 

From an intrasector perspective, the refiners are the clear leaders of energy. We don't expect this to change anytime soon, but we expect other industries to participate as well.

Finally, we have the VanEck Oil Services ETF $OIH, the wildest and most offensive slice of the entire energy complex.

Compared to the S&P 500, OIH has spent most of 2025 in a tight coil, refusing to break down despite every reason to do so. Now the coil is resolving higher and making new multi-month highs. 

And remember, these are the most risk-on stocks in the energy sector, and they look poised to outperform the broader market for the foreseeable future.

Energy is no longer the forgotten child of this bull market. It’s starting to rejoin the family.

What are you seeing in commodities? Let us know what you think. We love hearing from you!

Commodities Trade of the Week

This week, we're outlining one of the best-performing energy stocks ever, which we believe is about to rip.

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