Noted short seller Bill Fleckenstein, who correctly predicted the financial crisis in 2007, says he is one step closer to opening up a short-focused fund for the first time since 2009. In the meantime, Fleckenstein says the entire market could be heading for calamity in the coming months.
"The market is uniquely crash-prone," Fleckenstein told CNBC's "Fast Money" this week. "I think the market is very brittle because of high-frequency trading, ETFs, a lot of momentum investors. I don't think there's going to be any painless back door."
Fleckenstein, the president of Fleckenstein Capital, said he was targeting Oct. 1 to open up his fund, and said there is one overarching reason why conditions are perfect right now to be short the market.
"The reason why I closed my short fund in March of '09 is the very same reason that I'm going to launch it again. And that's because the Fed," he said.
Fleckenstein said he was surprised the market has been able to hang on as long as it has after the Federal Reserve stopped buying bonds. He added that markets have continued to trade on the "fumes" of the Fed's quantitative easing program, which was "unlike anything" the world has seen before.
Once those fumes run out, he said, Wall Street is in for another shock.
"The critical thing is from a short-selling standpoint and managing risk, the Fed is out of the equation. They may hike, they may not be able to hike, but they can't ease," he said. "So the market's kind of on its own, and it's sort of tenuous under the surface. It's a lot weaker than the averages look like."
According to Fleckenstein, Wall Street has "become complacent," and expectations for the remainder of the year are too high.
"The Fed's out of the way, stocks are reacting to bad news, expectations are very high, and I don't think they can be met," he said.
Fleckenstein said one segment of the market looks particularly attractive from the short side.
"I'm short semiconductor stocks because there is an inventory correction at a minimum, and there might be saturation," he said.
Intel is one name that Fleckenstein signaled out in the sector as a great short play.
"Intel's got some unique problems. I don't think they guided properly on either of the last two quarters, I think expectations are still way too high," he said. "So I have a stock that can't really go against me that maybe I can make 30 percent on the downside."
Additionally, Fleckenstein said that Apple suppliers could be setting up for pain ahead.
"The companies in the Apple food chain, whether it's NXP or SkyWorks or Cirrus, they all had good quarters and they guided higher," he said. "But Apple didn't hit its units, and it's got a lot higher units to hit in the third and fourth quarters."
Meanwhile, bullish investor Laszlo Birinyi of Birinyi Associates said the S&P 500 still has an upside of more than 50 percent from current levels.
"What we're really trying to tell people is stay with it. Don't let the bad news shake you out," he said Tuesday on CNBC's "Fast Money: Halftime Report."