The Wall of Worry
It is said the stock market climbs a “wall of worry”. This expression was coined in the 1950’s and depicts a sustained stock market rise during a time of economic, financial or political stress in which stock prices are said to be ascending a “wall of worry”. What greater stress is there than having a nuclear-armed, narcissistic nutcase as your nearest northern neighbor?
It appears as if South Korea has been able to overcome this wall as you can see in my chart of their stock market ETF proxy, EWY, below. It had been trapped in a huge 7 year, 35% sideways range, going nowhere offering buy and hold investors little to no stock market gains. But all that may have changed 3 short weeks ago.
As you can see, price gapped above long term resistance on more than a 50% increase in volume (lower pane) on the breakout which also pushed momentum (upper pane) into the bullish territory for the first time in many, many years. This is all very constructive and opens the door for additional and possibly significant future gains.
Even with the very positive outlook the charts are telling us as a backdrop, do your inner spidey-senses continue to tingle knowing you could be one bad hair day away from “a merciless sacred war” that will turn Seoul into “a sea of fire” or “reduce it to ruins with weapons of absolute justice”? If this were to happen I would guess it just might be one wall their stock market might not be able to climb. I don’t know about you but for now I am going to err on the side of caution and watch this all unfold from the sidelines in spite of the opportunities it presents.