For the second week running, the State Street Energy Select Sector SPDR ETF (XLE) was the worst-performing sector last week, down 3.9%. Remember, it was down 3.7% the week before as well.
And not only was energy down… it was literally the only sector down.
Led by the State Street Technology Select Sector SPDR ETF (XLK), every other sector finished the week higher.
So, what’s the story here?
Is the bull market in energy stocks over?
We’ll get to that.
But the short answer is “no.”
My Green Zone Power Ratings system suggests the energy bull market still has a long runway ahead.
Over the past two weeks, the broad market has been in an uptrend – and oil and gas stocks have been sagging – due to hopes that the worst is behind us in the Iran war.
Is that sentiment based on reality… or wishful thinking?
That’s unclear for the moment.
But the peace talks between the U.S. and Iran broke down over the weekend, and the U.S. Navy is currently blockading the Strait of Hormuz to prevent Iran from selling its crude oil (and ideally opening the Strait to non-Iranian ships).
I won’t attempt to predict how or when this ends. I have no edge in forecasting war outcomes. But the market is sending the message that, at least with respect to the tech-dominated U.S. stock market, the worst may be behind us for now.
But a recovery in the broader market doesn’t mean energy is doomed to underperform. In fact, its run is likely just beginning.
Energy stocks have been moving higher all year, and that bull market started before the war broke out. Energy stocks were rising because they started the year reasonably priced… and with a nice growth runway ahead due to the massive energy needs of the AI boom.
Nothing has changed on that front… and the sector continues to rate fantastically well on my Green Zone Power Ratings system.
Key Insights:
- Energy stocks continued their losing streak.
- The market is pricing in that the worst is behind us in Iran.
- There’s still a lot of headline noise, so it’s important to stay objective and stick to the system.
Tech Supreme
The tech sector enjoyed a nice rebound last week, pulling the S&P 500 Index higher.
As I’ve repeatedly said, it’s next to impossible for the S&P 500 to enjoy a sustained rally without tech stock participation.
Technology and tech-adjacent stocks make up close to half the index.
So, tech’s strong performance last week should be cause for celebration… if it’s sustainable.
I ran my customary screen of the biggest movers in the tech sector that were also still within 10% of their 52-week highs last week. The idea is to look for solid, market-leading stocks that are getting stronger.
Here’s what I came up with:
The move in tech hardware was off the charts. Four stocks were up over 20%, and the rest of the leaders weren’t far behind.
But before you load up on hardware stocks, you should keep in mind to pick and choose carefully.
Intel (INTC) is one of the lowest-rated stocks in the entire U.S. market on my Green Zone Power Ratings system. Meanwhile, Sandisk (SNDK), Coherent (COHR) and Seagate Technology Holdings (STX) all rate as “Bearish.”
This doesn’t mean that their rally is guaranteed to end tomorrow. But it does tell us to tread carefully.
Moving on, “Bullish” rated Lam Research (LRCX) and Applied Materials (AMAT) might look familiar to you, as will “Neutral” rated Western Digital (WDC).
These are all current positions in my Infinite Momentum Tech Titans portfolio.
I recommended Lam in May 2025, and it’s currently up 255%. I recommended Applied Materials back in September… and my readers have already doubled their money. Western Digital is a recent addition from February, and it has provided a very respectable 28% return so far.
I use a slightly different system in Infinite Momentum.
While my Green Zone Power Ratings are designed to find stocks that will outperform over the following year, the time horizon in Infinite Momentum is just four weeks. I’m looking for stocks my system has identified as most likely to outperform over the next month.
A good stock is a good stock, so it’s not unusual to see a company that rates well on one system also rate well on the other!
Buying the Dip in Energy
Let’s get back to energy.
I ran my customary screen of the sector’s biggest losers for the week that are still trading within 10% of their 52-week lows. The idea is to find beaten-down gems that look poised to recover.
Well, after the run-up in energy stocks, there weren’t many stocks anywhere near their 52-week lows, so I had to relax the criteria.
It’s been a rough two weeks, but there’s still a lot of “green” here. Six out of the nine stocks rate as “Bullish,” and not a single one rates as “Bearish.” Coterra Energy (CTRA) is the standout here, rating a “Strong Bullish” 90 out of 100.
The point is, no bull market moves in a straight line.
There are always corrections along the way.
The energy bull market is no different than any other in that respect. Until my system says otherwise, I’m treating this dip as a solid buying opportunity.
To good profits,
Adam O’Dell
Editor, What My System Says Today
