Good morning, traders…

Do you ever wake up and just feel … off? 

Your alarm goes off an hour late. You trip out of bed, stub your toe, and can’t get your thoughts together. You put your socks on backwards. You burn your toast. 

Like it’s “Opposite Day…”

Well, it sort of feels like “Opposite Week” in the financial markets right now. 

Counterintuitive price reactions to the Iran-Israel conflict have shocked some traders and decimated the accounts of others.

Here’s what happened…

Everyone was battening down the hatches leading up to the U.S. attacking Iran.

If we attacked Iran, the narrative was clear-cut: U.S. stocks were at risk, while crude oil prices were set to spike.

We did attack Iran. But the price action did the exact opposite of what everyone was expecting…

Major indexes jumped while crude oil and energy stocks dumped on heavy volume.

If you tried to buy SPY puts or oil calls last week, you just learned one of the most critical lessons in trading.

But you might not even know what it is yet…

Let’s Investigate Why Stocks Pulled a Fake-Out (And How You Can Avoid Similar Surprises Moving Forward)…

1. Expectations and Positioning

Markets move on expectations and emotions.

Before the strike, many traders were already positioned for disruption (long crude, short U.S. stocks). 

That setup created a friction: once news hits, there’s a strong unwind component. Rather than adding more volume to oil, that long‑crude crowd closed or trimmed positions. 

Stocks saw the same (but opposite): bearish bets were covered. The result was momentum flipping from what was anticipated.

2. A Potential Fed Tone Shift

At roughly the same time, Jerome Powell testified before Congress. 

He seemed to soften his tone on rates, even under geopolitical stress. 

Easing expectations added a “risk on” signal as equities benefit anytime rates look like they’re capped. 

Catching that nuance, bond yields pulled back, taking inflation concerns off the table. That reinforced the traction in stocks, despite the tension in the Middle East.

3. Fundamentals Outweighed Fear

That dip in oil surprised many, but it’s consistent with behavior seen in the past. 

If a supply disruption is expected (Iran potentially closing the Straight of Hormuz), it’s priced in early. 

If it actually happens, traders often respond by reducing positions, fearing peak‑panic exhaustion more than physical shortages. 

Plus, oil inventories were already well-stocked, and U.S. export infrastructure limited sensitivity. 

In short, fundamentals outweighed headline fear.

4. Flights to Safety

When geopolitical shocks hit, there’s huge demand for Treasuries and cash. That pushed the U.S. dollar higher after the strike. 

That stronger dollar made oil more expensive for foreign buyers, adding pressure to crude prices. 

Money flowing into U.S. stocks reflected confidence in U.S. markets as a relatively safe place, especially compared to international risk. 

The irony here is that fear abroad can boost U.S. stocks, even when the trigger is a U.S. military move.

5. Technicals and Trend Confirmation

After the strike, the S&P 500 came down to a key support level at its 21-day exponential moving average on the daily chart:

It didn’t crack. Instead, it rebounded into a breakout pattern, cracking the $605 resistance level I’ve been talking about for weeks. 

Many algos and swing traders picked up on that early and pushed hard on the upside. 

Meanwhile, oil charts were showing a pullback into a price channel with weak volume, triggering short‑term traders to press the short side. 

Volume‑confirmed technicals tend to guide sentiment, especially when headlines leave room for interpretation.

What These Moves Can Teach You

This episode is a prime example of how quickly positioning can reverse. 

A trader who entered with a plan for both outcomes — equities down/oil up and equities up/oil down — had flexibility. 

Even better, traders who set predetermined entry and exit levels avoided getting trapped by the narrative. 

When the S&P held support, that was a signal to shift gears. When oil rolled over on low volume, that was a clue to tighten stops or flip bias. 

Risk comes in many forms. Not just losses on open positions, but also paralysis from surprise.

Bottom Line: You always need to be prepared for anything the market throws at you. 

If you anchor decisions to storylines instead of levels, you end up chasing. 

If you anchor decisions to the price action itself, you’re prepared for anything at all times. 

How to Avoid Surprises in the Future

• Review your open positions. Ask yourself: Do they rely too heavily on narrative?
• Realize that “catalyst trades” are binary bets, like buying calls before earnings reports — they either work or they don’t. 
• If a big catalyst is on the horizon, map out technical levels (support/resistance) before the event itself occurs. Label them and make plans for any outcome. 
• Define your risk before entering. Use stop-losses religiously. 

Equities rallying in the face of geopolitical turbulence isn’t unheard of. But it reinforces an important lesson: price action matters more than anything else. 

Happy trading,

Ben Sturgill

*Past performance does not indicate future results