By Shane Murphy, CMT

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Technology vs. Energy

Will Energy companies and energy commodities resume upside participation? In commodity world, last year was all about the metals – as energy commodities struggled. In stock world, Technology was the leading sector. Printing a return of +24.6% versus +7.9% for Energy. But will there be a change of guard in 2026? Well, as we enter the last trading week of January, the S&P 500 Energy sector is up over +10% year-to-date. The sector is trading at new absolute price highs on both an equal-weight and market-cap weighted basis. At the same time, The S&P 500 Technology sector is flat year-to-date and hasn’t formed a new price high since October 2025.

The chart below displays the equal-weight ratio of Technology vs. Energy. When the blue line is rising (falling), technology (energy) stocks are outperforming. The ratio is trading into a resistance zone that marked the distribution top of 2021-2022. In the 12 months that followed the breakdown of said distribution top, energy companies and other inflation beneficiaries outperformed in a big way.

The chart notes how the weekly relative strength index did not reach overbought territory through the entirety of the market recovery (2023-2025). In my opinion, this tells us the trend is lukewarm and vulnerable to reversals. I’m keeping a close eye on Energy and broad commodities as both a portfolio contributor and diversifier!

Oil Services Leading the Charge

Within the Energy sector, there’s one industry group that is standing out. Oil Services. The industry is up nearly +20% through the first few weeks of the year. As Technology stocks were peaking in October, Oil Services crossed above their 200-day moving average. The industry is now just a hair away from new multi-year highs.

The above chart also displays the Relative Strength ratio – comparing Oil Services to the S&P 500 Index. In 2025, the ratio managed to hold above the COVID lows and is now trading at fresh 52-week highs. Very constructive price action from this industry group!

What’s Next for Crude Oil?

Now the elephant in the room is Crude Oil – the underlying commodity that influences the profitability of Energy stocks. Going back to October 2025 (an important month due to marking the 2025 high in Technology), Crude Oil is essentially flat, while the Energy sector is up double digits.

This divergence is notable. In my humble opinion, if Crude doesn’t get its act together, energy sector outperformance will be difficult to both establish and sustain. Energy sector prices may form new absolute highs, but relative to the market, the sector is likely to struggle.

Shane Murphy, CMT has been a CMT Charterholder since 2022. He is currently a Wealth Management Associate at Michael Roberts Associates, Inc. where he assists in portfolio construction, investment research, and financial planning. Learn more at www.mraplanners.com or check Shane out on twitter @murphycharts.

Shared content and posted charts are intended to be used for informational and educational purposes only. CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. CMT Association does not accept liability for any financial loss or damage our audience may incur.