In 1962, the Soviets moved nuclear missiles towards Cuba, a few hundred kilometers from the U.S. coastline, and the world held its breath at the provocation.
Fast forward 50 years, a similar development is unfolding: North Korea has moved nuclear armed ships within a few kilometres of its Southern neighbor, which some argue it remains still technically at war with (There was no formal peace treaty to the Korean war, just a ceasefire), and within a short distance of its major ally China. The Korean markets started a slide that sent shivers through world markets. Currencies were the first to react, and the most volatile.
But is it an over-reaction? The weekly chart of the Seoul's benchmark Korea Composite Index (KOSPI) suggests the long term uptrend for the market remains intact. The retreat was exacerbated by the face-off between North and South, but, technically, the retreat was not unexpected. All other issues aside, this is significant because the KOSPI tends to lead the behavior of other regional Asian markets. A continuation of an established trend is bullish. A move below the established trend is bearish, and sends a warning signal to other markets to watch for similar change of trend signals.
The KOSPI chart has three main trend signals.