Alessio Rastani and Manuel Blay discuss oil prices through the lens of Dow Theory
Alessio Rastani interviews Dow Theory analyst Manuel Blay on whether oil prices will rise to new highs in 2026.
Summary
Alessio Rastani interviews Manuel Blay of DowTheory.com to analyse the current state of crude oil prices against the backdrop of the Iran conflict and its potential impact on energy markets. Manuel argues that, according to Dow Theory, the recent pullback in oil does not yet qualify as a correction — meaning oil remains in a bull market — and that energy ETFs such as XLE are among his top-ranked holdings. Alessio agrees with the broad bullish case but expresses caution due to an acceleration extreme overbought signal that previously appeared in 2022 before oil entered a bear market. Both agree that portfolio diversification across multiple assets — oil, gold, Bitcoin, and stocks — is the sound approach, regardless of any single position's outcome.
Key Takeaways
FULL TRANSCRIPT
Introduction and Chart Context
Alessio Rastani: Hello and welcome, everyone. We're honoured to have our special guest Manuel Blay from DowTheory.com — that is his newsletter. Manuel, I want to talk about the chart of oil. Obviously, we have the background of the Iran war happening. A lot of people have been worried about the potential for higher oil prices and maybe even higher fuel prices in the future, depending on what happens with oil. So that's why oil prices matter.
I guess before we go on to your analysis, let me give some context here. Some weeks ago, I mentioned that when oil spiked higher, there was an acceleration extreme. We can see on the lower panel of this chart a red acceleration extreme in 2026, and you can see that occurred just before this major drop — this recent drop that occurred on oil prices. Now, the last time this occurred on the oil weekly chart was in 2022, on the left-hand side. We can see some years ago a red acceleration extreme when oil prices became parabolic, and then dropped down to the 21-week moving average. Then, after it dropped down to the 21-week average, it bounced for some weeks and months, and then fell into a bear market.
We've had a pullback at the moment, and we can see on the right-hand side a nice pullback to the 21-week average. It hasn't fallen below support — support at 76 or 70. My question to Manuel Blay is: what does he think is more likely for oil prices in the next several weeks and months? Could we see new highs on oil prices, which could be very frustrating and not so good for people who drive cars?
Manuel Blay's Dow Theory Analysis of Oil
Manuel Blay: According to Dow Theory — because we see things through Dow Theory — it is not even a correction yet. So, not even a correction really.
Alessio Rastani: Yeah, because I think the drop has lasted nine days. This is in my charts. I think it lasted nine trading days on crude oil.
Manuel Blay: In my data feed, the decline in crude oil has been only nine days. Look at the orange rectangle — it has been only nine days. At the very least, I need ten days on a confirmed basis. Because on the top chart we have crude oil, but the bottom chart is XLE, the energy ETF, because I always use confirmation — always — with Bitcoin, everything.
The energy ETF XLE has dropped for fourteen days, and with highly volatile assets I am okay if I just have ten days. But on a confirmed basis, less than that — it's like the drop in gold. If the first drop was three days, two days, it's okay, it's a sharp drop, but it's not a correction. So from a Dow Theory perspective, it is a bull market. What I see on the orange rectangles is not a secondary reaction yet. If the price for oil drops next Monday — another price down — then we would get a secondary reaction, and then it's just a secondary reaction within a bull market. So we still have a bull market and a secondary reaction. As a Dow Theorist, I am bullish.
Energy Stocks and XLE
Alessio Rastani: If it's correct that crude oil has moved into a bull market — and if we're in a bull market in oil and that continues — presumably this would be beneficial for certain sectors in the economy. I think it's your view that potentially oil stocks or energy stocks could benefit. Are you, for example, quite bullish on energy stocks like XLE? Are you bullish on that? Which, by the way, has also pulled back to approximately the 21-week average.
Manuel Blay: Exactly. And this pullback is healthy. This is a healthy pullback.
I'll tell you the truth — XLE has been top-ranked. I have a position in this energy ETF because it is one of the top three ranked sector ETFs. It's one strategy that has been proven to work. I have a position in the energy ETF — that says everything. The market is bullish.
If I look at the earnings revisions profile — for me, earnings revisions means not the absolute level of earnings, but the trend of the revision. Are analysts revising earnings upward or downward for a given quarter? I don't care about the price level; I care about the direction. Trend follower, once again. So if the direction of revisions is trending lower, then it tends to be a headwind against higher prices. But of course this is quite relative, because sometimes price leads revisions. The sweetest moments are when both the trend of revisions and the trend of the asset are in gear. This has been tested and proven — these are the best moments of outperformance.
Alessio's Cautious Take and Key Support Levels
Alessio Rastani: Just to let everyone know, this video is only for educational purposes — by no means a recommendation to buy or sell any market, ETF, stocks, crypto, or anything at all.
I would say, as long as oil can stay above 76 or 70, this is simply a pullback or correction. Manuel says it could just be a pullback, not a correction. I don't know if we're going to make new highs on oil — that, to me, I remain uncertain about. Why? Because of the extreme acceleration we had recently. I would prefer to agree with Manuel here that we could be in a bull market on oil. I'm still leaning a bit cautious, simply because of the extreme overbought conditions we had recently, which the last time they occurred — in 2022 — resulted in a bounce first, and then a drop into a bear market. So I'm a bit concerned about that.
Keeping it simple: as long as crude oil stays above 76 or 70, there is potential for another bounce or rally, perhaps to the 100 level. Whether it goes to new all-time highs, I don't know. But Manuel is more bullish on this than I am, and he could be right.
The Portfolio-as-Football-Team Philosophy
Manuel Blay: I'm bullish. But I consider investing like a football team — you're British, so football. You have to have several assets: Bitcoin, gold, stocks, ETFs, you name it. And then it's like a team. Some of them will score, the others won't — but maybe Manchester United won. And this is important. Maybe you were wrong in one specific prediction — I hate that word — but the team won. You have to look at it from a portfolio perspective, from a football team perspective. If you have a good strategy, if you know how to appraise trends, some of your team members, some of your players, maybe won't score and maybe will have a horrible day. But you don't care, because as a team, as a portfolio, you will perform.
Alessio Rastani: I agree. We have talked about Bitcoin, gold, silver, stocks — and if you have a portfolio and a sound methodology, and you know when to buy and when to sell, some of your team members, some of your players, maybe won't score and maybe will have a horrible day. But you don't care, because as a team, as a portfolio, you will perform. There's a famous saying which goes back centuries: it's not about winning every battle, but it's about winning the war. So yeah, you're correct.
Manuel Blay: Win the war.
Alessio Rastani: And also, I actually think — I take everything you say quite seriously. I do think there's potential for energy stocks and oil stocks to do quite well in the next several weeks and months, provided oil also stays in a bull market. I'm going with what you're saying here. I agree with you. I'm simply saying there are a few charts that make me a little bit worried, like the overbought conditions we saw. Again, we'll see what happens.