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Goldman Declares Shorts Season, Pros Not So Sure

Thursday, 21 Jun 2012 | 1:24 PM ET

As temperatures top 90 degrees on Wall Street, Goldman declares shorts season. But the Fast Money pros think longs may be more appropriate.

Of course the heat wave sweeping NYC is coincidental. When Goldman talks about shorts – they mean selling short.

And selling short is exactly what they recommend after the latest data from the Philly Fed called the recovery into question. “This morning, the Philly Fed print of -16.6, down sequentially and worse than expected, provides further evidence that weakness has extended into June,” write Goldman analysts.

They go on to say that without any kind of QE coming imminently the market will be forced to trade on economic data, which appears to be deteriorating, especially overseas.

Goldman is looking for the S&P to sell down to 1285 – sliding about 5% over the next few weeks.

And while Goldman sells the markets Fast Money trader Brian Kelly is buying. In fact Kelly, who is founder of Shelter Harbor Capital, thinks selling the market at current levels is exactly the wrong trade.

Kelly sees plenty of upside catalysts in the near term - not the least of which is his belief that the Fed is ready to unleash some serious firepower. In support of his thesis he says just look at the last sentence of the Fed statement. (It says “The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”

Goldman Sachs Goes Short
Stocks hit session lows after Goldman says go short, with the Fast Money team. Meanwhile oil falls below $80 for the first time since an intraday low of $79.08 in October, with Jeff Kilburg, Kilburg Capital.

“I think it’s wrong to take some off the table; on the dip I’d buy more,” he says.

CNBC contributor Ron Insana shares the opinion. He points to Fed commentary about inflation. (The Fed said, “Inflation has declined… (and) longer-term inflation expectations have remained stable.)

“Not only is the door open (for more QE) but I think they walk through it,” says Insana. The statement suggests that inflation isn’t the issue, it’s deflation and that’s a key ingredient of QE.

Trader Stephanie Link also thinks stimulus is on the table. “You have to ask yourself, will the Fed allow the economy to take another leg down? If it gets much worse, I think they act.”

However, it takes two to make a market and trader Steve Cortes, founder Veracruz, a research and consulting firm, is on the other side.

He thinks in an election year the Fed will be reticent to introduce more easing. “Expectations of QE are far too optimistic. To bet on that; I think it’s misguided.”

Trader Steve Grasso, director of institutional sales trading at Stuart Frankel, thinks the technicals will tell the story. “Watch 1335, he says. That was a level of strong resistance and now it should be support. If we break below that – then I’d agree with Goldman - we’re going back to 1285.”

What do you think? We want to know!

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Posted by CNBC's Lee Brodie

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Trader disclosure: On June 21, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Brian Kelly is long BAC; Brian Kelly is long PNC; Brian Kelly is long AAPL; Brian Kelly is long JPM; Brian Kelly is long UUP; Stephanie Link is long JPM; Stephanie Link is long CVX; Steve Grasso is long CUBA; Steve Grasso is long GERN; Steve Grasso is long HPQ; Steve Grasso is long HSPO; Steve Grasso is long MU; Steve Grasso is long NYX; Steve Grasso is long PRST; Steve Grasso is long VVUS; Steve Grasso is long XRX; Steve Grasso is long ZNGA; Steve Grasso is long APC; Steve Grasso is long BAX; Steve Grasso is long DVN; Steve Grasso is long ESEV; Steve Grasso is long TBT; Steve Grasso is long UNM; Steve Cortes is long PPH; Steve Cortes is long SVU; Steve Cortes is long TREASURIES; Steve Cortes is short XLY vs. S&P LONG; Steve Cortes is short QQQ; Steve Cortes is short COH; Steve Cortes is short GOLD; Steve Cortes is short EUR

For Todd Gordon
Nothing to Dislcose

For Don Yacktman
Don Yacktman is long RIM
Don Yacktman is long PG
Don Yacktman is long MSFT

For Jeff Kilburg
Nothing to Disclose

For Mike Binetti
UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of the following companies' common equity securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end): JCP
The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in NKE
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: KOH
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: RL
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: KOH
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: RL
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: KOH
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: RL



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