Chicken Little's Investment Advice

On March 31, 2015, Chicken Little revealed his investment positions (click for Where Does Chicken Little Invest?)  On March 31, 2015 the Dow Jones Industrial Average closed at 17,776. As I write this, the Dow is at 17,761.  So the US stock market, as measured by the Dow, has not changed in a year. While nothing has happened in overall price, there has been a big change from a momentum investor's perspective. 

Chicken Little aims to invest like Rocky fights

What would Rocky do now? Chicken Little says keep it simple. 

Chicken Little is a 'ham-n-egg' momentum investor. Rocky Balboa is a "ham-n-egg" boxer not because he drinks raw eggs, but because he avoids fancy boxing techniques and simply hits his opponent. 

How does a ham-n-egg momentum investor make decisions? Chicken Little looks at 5-10 year charts of prices. If the price is higher today than it has been, Chicken Little labels that a bull market. If the price is lower today than it has been, Chicken Little labels that a bear market. Chicken Little never fights the charts. That means that Chicken Little buys some bull markets, and sells short some bear markets. 

What does Rocky have to do with the Dow Jones Industrial Average? The US stock market has been in a massive bull market since March 9, 2009. What's changed in the last year is that it is now more likely that the bull market has ended. The Dow has not made a new high since May of 2015. 

That makes the next move straightforward for Chicken Little. If the Dow makes a new high, Chicken Little will Buy. If the Dow makes a new, multi-year low, Chicken Little will sell. 

I continue to believe that most people would do better to reduce their level of financial risk. Here are my two prior posts on this topic (reduce risk post 1, reduce risk post 2). 

The market has gone nowhere in a year, but the picture has changed

Postscript July 2016

The Dow Jones Industrial Average made a new all-time high in July of 2016, 14 months after its previous high in May of 2015. 

Chicken Little is Powerless Against Central Bank Money Printing

Chicken Little never bets against markets at new all-time highs; according, when the new high was made in July 2016, Chicken Little bought US stocks to cover a short position, and,  in addition, bought more US stocks to establish a tiny long position. 

Read July 2016 post "Chicken Little Buys US stocks.

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