Energy stocks are off to a monster start in 2026.
While the S&P 500 is flat and the Nasdaq 100 is in the red, energy is up 23% year to date. That’s not “quiet” outperformance. That’s leadership.
And it isn’t just the large caps doing the heavy lifting.
The Oil Services ETF (OIH) is up more than 37% and we’re not even through February. The Small-Cap Energy ETF (PSCE) is up 28%, outpacing its large-cap peer.
Even the S&P Oil & Gas Exploration & Production ETF (XOP) is up nearly 20% already this year.
For a group that spent years as a structural underperformer, this is a totally different tape.
So the questions are simple. Is this just a violent countertrend bounce in a long term laggard? Or are we witnessing the early stages of a sustained leadership cycle?
To answer, we can’t just look at the stocks. We need to look under the hood. What is crude oil itself doing? What does the positioning look like?
And are we seeing the kind of structural shifts that tend to fuel multimonth, or even multiyear, trends?
Let’s start with the commodity itself.
The Commodity Itself
Before we get too excited about the stocks, we need to look at the thing that drives them: crude oil.
Because if energy equities are going to continue leading, the commodity itself needs to cooperate.
Here’s what stands out on the weekly chart of crude oil futures:
The entire decline off the recent highs stopped almost precisely at the 61.8% retracement of the rally from the COVID-19 lows.
You already know how I feel about these levels. Fibonacci retracements are not magic. They simply measure the normal behavior of trends.
Over and over again, we see markets find support near that 61.8% level during ongoing structural advances.
That’s exactly what’s happening here, at least so far.
Now look at momentum. Weekly RSI never reached oversold conditions during the decline.
That’s classic bullish regime behavior. In longer-term uptrends, pullbacks tend to be shallow enough that momentum resets without ever breaking down.
So we have price holding a key retracement level and momentum behaving like it belongs in a structural uptrend.
Combine that with energy stocks already leading the tape in 2026, and you have the makings of something more than just a dead cat bounce.
And if the commodity itself is setting up like this, the next question becomes obvious.
Who’s positioned for it?
The Positioning Is the Catalyst
Now it gets interesting.
Since last summer, large speculators have built the biggest net short position in crude oil futures ever recorded.
Read that again.
The same crowd that last year was record short Russell 2000 futures while simultaneously record long Nasdaq-100 futures is now leaning aggressively short crude oil.
How did that work out for them?
Exactly. At extremes, this is the group we want to fade.
When we study futures positioning, we’re separating two completely different players.
On one side, you have the commercial hedgers. These are the producers, refiners, and operators actually in the business. Think of the corn farmer hedging his crop.
They tend to be early and they tend to be right at major turns.
On the other side, you have asset managers and hedge funds. They chase trends. And at extremes, they are often caught completely offsides.
So let’s connect the dots.
Energy stocks are ripping.
Crude oil is holding key Fibonacci support with momentum in a bullish regime.
And speculators are sitting on historic net shorts.
That’s fuel.
Relative strength… momentum… price structure… sentiment.
Check… check… check… check.
We want to own strength. We want to press winners. And we want to lean against positioning extremes when the weight of the evidence lines up.
If crude oil starts pushing higher, those record shorts don’t just disappear. They have to buy it back.
And they won’t be buying it lower.
This rotation into energy has already paid us. The real question is whether this is just the first inning.
I think you know where I stand.
You with me?
Stay sharp,
JC Parets, CMT
Founder, TrendLabs