Markets are likely to head lower. A lot lower. Maybe not tomorrow or the day after, but the intermediate to long term definitely looks gloomy. There is currently a lot of indecision and panic is not far away. Even mainstream media has started to address phenomena such as the Death Cross, Hindenburg Omen and deflation. But if the markets should panic and there would be blood in the streets (hopefully metaphorically), it is time to get greedy as a long term dividend investor.

It’s been a month since I wrote about the death cross likely to occur in the S&P 500 weekly chart. If you compare the chart I pasted in that post with the most recent one, you will see that it will take a BIG rally next week to avoid it from happening!

Yesterday we also had a confirmed Hindenburg Omen. Today, we got a second confirmation! This is also ominous for the markets. The probability of a greater than 5% move down within the next four months exceeds 70%, and the odds of a panic selloff (defined as a rapid 10% or greater decline) is about 40%, and the odds of a crash (defined as a 20% or greater rapid decline) is approximately 20%, according to Karl Denninger at Market Ticker.

We have also seen mainstream media letting market sceptics express their concerns on air. Rick Santelli had a already famous rant on CNBC the other day about the unsustainable market interventions by the government.

CNBC also aired Hayman Capital’s Kyle Bass as he explained that “given my outlook on the world, I don’t know how I can be long stocks”. For once a bright and non-pumping person was allowed to explain his view relatively uninterrupted, and what he said scared the living …. out of many viewers.

Part 1

Part 2

I tend to agree with the rather gloomy picture that is painted by Mr Bass. The reality of the situation is worse than what the markets seem to price in. Then again, my focus is not six months down the road, it is years and years ahead. And in that perspective, the U.S. really is bankrupt. So are most of the Southern European countries, the U.K. and Japan, too.

So I think we are going lower. A lot. For a long time. But, like Warren Buffet, I get fearful when others are greedy, and greedy when others are fearful. Now, don’t get me wrong. I am not advising anyone anything (read the disclaimer). I am not going to buy every little dip. But if we start seeing the major crash days we saw during the last decline, I will be watching. I have saved up a decent amount of dry powder to employ gradually in high quality dividend stocks as the opportunities arise. When people throw away their stocks in despair, I’m ready. Are you?