Remember when the market freaked out over Operation Epic Fury? Oil spiked, volatility went nuts, and the S&P 500 dropped below its 200-day moving average like it was heading for the exits. For about 48 hours, everyone was pricing in World War III.
Then something funny happened: nothing.
The geopolitical temperature dropped from “thermonuclear” to “tense but manageable.” Back-channel talks became actual talks. Oil started giving back its war premium. And the S&P 500? It climbed right back above that 200-day line on March 23 like the whole thing was just a bad dream.
This is what happens when markets reprice a worst-case scenario in real time. And if you’ve been paying attention, you’ve seen this movie before.
The TACO Playbook Strikes Again
Last April, Trump’s “Liberation Day” tariffs sent the market into freefall—down nearly 5% in two days. Everyone was bracing for a full-blown trade war. But then something predictable happened: the threats got dialed back. Financial analysts even have a name for it: TACO (Trump Always Chickens Out). It’s not cynical—it’s just pattern recognition.
The Iran situation is following the same script. The strike was designed to produce leverage, not prolonged conflict. Maximum pressure. Maximum optics. Maximum negotiating room. Iran, despite the tough talk, faces serious economic and strategic incentives to avoid escalation. When the cost of not blinking exceeds the cost of blinking, you blink.
If that logic holds—and early signals suggest it might—here’s what happens next: oil retreats to the $65-$70 range, the inflation pulse washes through in two to three months, and the Fed finally gets the window it’s been waiting for. Rate cuts resume. The economy exhales. And stocks—especially the AI infrastructure complex that got caught in the crossfire—move higher.
The Technical Picture Just Got Interesting
Here’s where it gets really good. Researchers looked at every S&P 500 trading day since 1950 and found 91 instances where the index briefly dipped below its 200-day moving average (no more than five days), then retook the line while the slope remained positive.
The forward returns? Solid. But when they split the data into two groups—”V-Shape” events (where the market held above the line for 15 consecutive sessions) and “Choppy” events (where it kept testing the line)—the difference was dramatic.
V-Shape events averaged +6.5% over three months with an 87% win rate. Twelve months out? +13.0%. That’s clean.
Choppy events? +1.9% at three months with a 52% win rate. A coin flip.
The classification window is the next 15 trading sessions—roughly through April 15. If the market holds above the 200-day and builds a base, we’re in V-Shape territory. And history says that’s when things get really interesting.
The Bottom Line
The macro case suggests Iran de-escalates, inflation cools, and the AI bull market resumes. The technical case says this 200-day retake is historically powerful—but only if the market holds the line over the next few weeks. If both play out, the next 12 months could look very good indeed.
The playbook says we’ve seen this before. And the data leans bullish.
