Hey, Ross here:
Stocks have been whipsawing as the Iranian conflict unfolds.
But that’s nothing compared to what we’re seeing in oil.
Chart of the Day
This is just a sample of the violent moves we saw in crude oil yesterday.
Down 8% one minute – then up 5.5% and then another 9.6% in the next couple hours.
These are what we call “multi-sigma moves”.
In other words, if you assume oil prices move according to a normal distribution…
Then these are moves that should only occur once every thousands of years.
But as Black Swan author Nassim Taleb famously shared to the world – financial markets do NOT follow a traditional normal distribution.
They follow a “fat tailed” distribution…
Where these supposedly “one in a thousand years” moves happen far more frequently than that.
In fact, the oil price volatility we’re seeing right now?
It’s not even the highest volatility we’ve seen in the past two decades.
So far, stock markets have still remained relatively rangebound.
But historically, oil price volatility translates directly into stock price volatility.
Combine that with the severe deterioration in market breadth we’ve seen, with the percentage of stocks trading above their 50-day moving average dropping like a rock since late January…
And that means – prepare for more volatility ahead.
Insight of the Day
Even if the Iran conflicts ends quickly, the “lag effect” could still translate into stocks
Volatility will likely persist even if the Iran conflict ends quickly.
One part of it is the “lag effect” when oil price volatility is translated to stock volatility.
The other part is Trump himself.
It’s obvious he’s playing this situation very close to the chest…
Which, combined with his natural “wild card” nature, means stocks will likely still bounce up and down.
This will spook a lot of traders.
Some will choose to sit out of the markets entirely.
Others will blunder in blindly and get burned.
That’s just how it is when volatility spikes.
But remember, without volatility there is no opportunity.
And that means, if you know how to play your cards correctly, you could turn this whole Iran situation – and the multi-sigma moves we’re seeing – into market profits.
To give you a quick example…
Here are four “safe stocks” that could be a great addition to your portfolio right now.
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Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
