Current tensions between the U.S. and North Korea echo those of the Cuban Missile Crisis in 1962 when Kennedy was president and the nation stood at the brink of nuclear war. Today, we have a "young punk" who rules with an ego the size of Manhattan, and yes, I'm speaking of the baby-faced, communist leader of North Korea, Kim Jong-un. Sanctions make no difference to Jong-un as the U.N. has enacted numerous cumulative rounds of sanctions against North Korea for its nuclear program and missile tests. Jong-un has also had various members of his family executed.
Kennedy always made sure Khrushchev had a face-saving way out. “Every opportunity was to be given to the Russians to find a peaceful settlement which would not diminish their national security or be a public humiliation,” his brother Robert Kennedy wrote. “I am not going to push the Russians an inch beyond what is necessary,” the president said.
Thus, trying to predict the depth of a correction during a crisis is an ill-conceived strategy. Price/volume action got you to safety, but it also signaled the all-clear by the huge volume buy spike off the lows as seen in the highlighted area above, just a few days before a peaceful resolution was reached. Leading stocks that held up during the selloff may have staged Wyckoff undercut & rally moves which could have been bought. From the lows brought on by the crisis, the SP500 proceeded to rally almost 30% over the next few months.
When it comes to correcting markets, it is better to let price/volume take you out of your positions as a market correction takes hold as we have guided members at Virtue of Selfish Investing. And for those who short, Gil Morales has been writing condensed pieces on the essential rules of short-selling from our book "Short-Selling with the O'Neil Disciples".
Kennedy always made sure Khrushchev had a face-saving way out. “Every opportunity was to be given to the Russians to find a peaceful settlement which would not diminish their national security or be a public humiliation,” his brother Robert Kennedy wrote. “I am not going to push the Russians an inch beyond what is necessary,” the president said.
By contrast, Trump and Kim are potentially a toxic combination where each may feel their manhood is being attacked. Ray Dalio, chairman and chief investment officer at Bridgewater Associates, has urged investors to hedge their risks with gold "just in case" as both leaders are confrontational and militaristic.
While it is true that most crises situations are short-lived for the stock market, that's a relative statement. If we look at 1962 during the Cuban Missile Crisis standoff between Kennedy and Castro when the nation stood at the brink of nuclear war, it ran only from Oct 16-28 but the S&P 500 fell nearly 10% from peak to trough as shown by the highlighted area in the chart below.
When it comes to correcting markets, it is better to let price/volume take you out of your positions as a market correction takes hold as we have guided members at Virtue of Selfish Investing. And for those who short, Gil Morales has been writing condensed pieces on the essential rules of short-selling from our book "Short-Selling with the O'Neil Disciples".