The energy sector is taking the bull market lead from tech. Here’s one way to play it
(See the video above for Todd’s complete chart breakdown.) It’s hard to believe, but energy — not technology — is not only still leading the sector year-to-date scorecard in 2026, it’s building on the lead. Last week, we talked about a Brazilian energy company. I was looking forward to talking technology this week, but we need to stay where the “energy” is. The Energy Select Sector SPDR Fund (XLE) is up 53.3% year to date, more than three times the S & P 500’s 15% gain. The Technology Select Sector SPDR Fund (XLK) is still up a strong 36.8%, but look at the shaded box on the right side of the chart. Over the past two weeks, tech rolled over while energy ripped to new highs. Wednesday’s September CPI report added fuel. Headline inflation came in at 3.7%, a tenth above expectations, and bond yields pushed higher. That’s a headwind for long-duration growth stocks and, in my view, another reason that energy has staying power. I think there’s a deeper message that we need to uncover here from the bond market, more than just hot inflation or geopolitical tensions. I split the 10-year Treasury yield into its two pieces: expected inflation and real yields. Only real yields are making new highs while expected inflation remains off the highs. I also overlay crude oil on all three measures. It tracks one far more closely than the others, and that matters for how energy trades from here. There’s the crude oil chart itself. Even after this week’s Houthi attack on a Saudi Aramco facility, WTI is coiled in a tight triangle between falling resistance in the low 100s and rising support near 90. Whichever way it breaks should set the tone for the whole energy complex. In our latest rebalance of the portfolios, we maintained our significantly overweight allocation to energy. The cleanest play in here, in our view, is in the barrel. It’s the refining margins. The diesel crack spread (what refiners earn turning crude into diesel) climbed from about $25 a barrel in January to a peak above $110 in September. It’s cooled to around $95, yet the VanEck Oil Refiners ETF is holding near its highs. Marathon Petroleum This is why we re-entered Marathon Petroleum (MPC) in our most recent rebalance and why we remain overweight energy. Marathon has climbed inside a well-defined channel since its 2020 low. At about $477, it sits far above its 200-week moving average near $181. Resistance points to the $600 to $650 area, so there may be room to run. As described in the video, I’m definitely nervous about adding to this name and the energy industry, as they are so extended. But the market is telling us that energy stocks are trading on more than just inflation expectations or geopolitical pressures. There’s more to the story. We, as active managers, mean staying with the trade that the market is focused on, with a defined plan in case it unwinds. Marathon reports Q3 results on November 3 before the open. In the full video, I walk through six charts, including: The bond market signal hiding inside Wednesday’s CPI sell-off Which bond yield crude oil actually trades with An understanding of how the diesel crack spread is driving the refiners The breakout and breakdown levels I’m watching on WTI Discussion of managing risk on this extended refining trade Todd Gordon is the founder of Inside Edge Capital, LLC. DISCLOSURES: Todd owns PBR and MPC personally and for clients of Inside Edge Capital, LLC. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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