Another Top: Goldman Recommends Opening Long Positions In Russell 2000

Tyler Durden's picture

Even as Goldman's economists have been bashing the Fed for not proceeding with a full blown LSAP QE, and have been warning repeatedly that the economy is due for a significant leg lower, here is Goldman once again doing all it can to trade (i.e. dump) its own inventory first and foremost, with a just released trade reco which in our opinion marks a market top far better than any squiggle on a DeMark chart. From Goldman: "We are recommending long positions in the Russell 2000 with a target of 860 (c+8%) and a stop of 765 (c-3%), marked relative to today’s open." As a reminder, for every client who is buying from Goldman, Goldman is selling. That is all.

From Goldman

Trade Update : Recommending long positions in Russell 2000


We are recommending long positions in the Russell 2000 with a target of 860 (c+8%) and a stop of 765 (c-3%), marked relative to today’s open. The FOMC tilted toward an incrementally more accommodative stance yesterday, and despite turn-of-the-year volatility, the four week moving average of UI claims continues to drift lower even after this morning's rebound. With financial conditions remaining easy and cyclical indicators still improving, we continue to lean in a pro-cyclical direction and are taking the opportunity to re-engage after stepping back last week. The Russell is a high beta, economic growth sensitive, and domestically levered implementation that has not outpaced other cyclical equity themes.


To be clear, there are few particularly striking laggards to the cyclically led rally amongst potential US equity implementations. And so, our tactical view here is less about catch-up then it is about continuing equity market momentum, driven by easy financial conditions and improving cyclical data. Outside of the US (EMs equities in particular) or outside of equities (longer-dated USTs), the scope for that sort of catch up looks greater. But, a more dovish Fed and data strength still concentrated in the US are the catalysts behind our tactical trade here and we wanted to express that equity view in a domestic-heavy way. Going forward, we do think that a better cyclical backdrop and easing financial conditions, typically a “sweet spot” the business cycle for equities, is a theme that could extend into the EM space and next week’s PMI data will be informative on this score.


Primary risks to the trade are still the two familiar ones. As always, Europe remains unsettled, on the one hand Greek PSI talks and a looming need for funding by March, are, for now, being counterbalanced by LTRO relief and improving data, but that could easily change. Second, the tactical view here is, not surprisingly, data dependant. Data have been surprisingly strong for some time now, and, as expectations ratchet higher, the bar to continue to beat goes up too. So, although the early data still look firm, we will evaluate the evolving dataset in light of our forecast call for a deceleration in 1Q2012 (and relative to fairly robust growth last quarter).

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WonderDawg's picture

My shorts have been getting killed, but this gives me hope.

SillySalesmanQuestion's picture


I agree..this is the Mother of all shorts...where is Robo when we need him...

bgilliam83's picture

lol, you'd have to be a tard to short a market with locked in eternal 0%.  This one is so obvious a long market, probably to weimar rep heights.  If anything they are calling it short, but I still applaud the effort to get back some street cred here.

WonderDawg's picture

I guess that explains the record high volume we're seeing? Oh, wait, volume is almost non-existent.

Stax Edwards's picture

Opened position in IWO around new year, been adding to it as we move up.  Might as well throw another log on the fire today.

Jay Gould Esq.'s picture

What is it with the boys at 200 West Street, and this flurry of top-calling calls ?

Goldman Gone Wild.

Alea Iactaest's picture



Obvious long? Obviously you haven't bothered to look at a 25- or 30-year chart of the Nikkei. If you did, you might notice that a couple decades of QE has done little to elevate, let alone maintain, equity prices since 1990.


Here's the future: lower highs, lower lows. Of course it won't be a straight line. But if you want to follow the Squid then be my guest. In the meantime keep betting that RUT and SPX can maintain their current trajectories. I'd be happy to sell you a bunch of OTM calls for just about any month you choose.


[Edit for clarity]

The Monkey's picture

Unlikely the US charts will look quite as bad as Japan's (but not impossible). The P/E multiple in the Nikkei reached somewhere around 2X of the United States circa 2000. Japan's valuation bubble by this metric was bigger. On the other hand they had rapid worldwide growth and an export economy as tailwinds.

Still, it looks like most high beta stocks, expecially financials, are going to suck wind. The rules of thumb for me are that the dividend yield on the S&P 500 should exceed the yield on the 30 year treasury before stocks as a class start looking attractive. The premium for treasuries may end up being quite surprising. Whereas Shilling is calling for the treasury rally to end @ 2.5% yield on the 30 year, I wouldn't be surprised to see yields around 2% before this is all over. Treasuries are probably the place to be for a lot longer than any of us would like to believe.

The good news: investing is rather simple these days.

connel20's picture

If volume is reverting back to a time before the boom of HFT and algo' that such a bad thing?

SeverinSlade's picture

Perhaps eventually, but the low volume and the fact that Greece is set to default in under 2 months means there's going to be a major hiccup along the way.

VanillAnalyst's picture

"Second, the tactical view here is, not surprisingly, data dependant."


Wait wait wait, so now GS is making recs based on DATA!?!? ON DATA!?!?!? you scum...... you filthy scum.....

SheepDog-One's picture

bgillman, the 'tard' factor would have to be going long at the top when everyone and their cousin is on that side of the boat.

bgilliam83's picture

Yeah, I guess it's so smart to open yourself up to complete liquidation and bankruptcy proceedings to gain what exactly here?  Seems like everyone and their cousin is in agreement of the short here, yet the market moves against you.  I got no problem with that fade, you guys are idiots.  Start shielding your assets.

laserjock's picture

I am also short, and the psychological pressure is becoming insane.  I read this site too much and am completely missing short/intermediate term trends.  I'm sure if/when I capitulate it will mark top tick.  I'll do everyone here a favor and let you know when I can't take it anymore so you can go short.  You're welcome.

Stax Edwards's picture

While the TD's sentiment has improved markedly of late, don't forget they were die hard bears during what was a 100% return from 666 up.  Be sure you read the full disclosure link at bottom right, and try not to take anything too seriously.  

Maybe you will get lucky and Greece will default, contagion will spread across the world, US will go back into recession and job losses will start speeding back up.  

WonderDawg's picture

Stax, you make it sound like we're sadistic bastards for recognizing reality. I don't wish for those things, I just believe they are inevitable and the longer we delay the inevitable, the worse the ultimate damage is going to be, and it's bad enough already.

Stax Edwards's picture

IMO if you are shorting the US indexes you are just asking to have your ass handed to you (day trading excluded).  

Look at CAT results alone, this is not indicative of a deepening recession. They absolutely KILLED it.  I hope you get a nice pullback to cover, I see pain in your future.

WonderDawg's picture

I guess we see things differently. Time will tell whose version of reality will prevail.

WonderDawg's picture

Agree on the psychological pressure. This also gives me hope. If I'm almost ready to go long into this goldilocks bullshit market, we have to be at the top.

moriarty's picture

Know the felling.  Did the same in Sept 10 but rode it out for a gut wrenching 11 m ‘til Aug 11 & got it all back. Stupid git that I am I have gone & done it again from just before the Santa rally. May be one day I will get the hang of this, as since I have had the scales lifted from my eyes I cannot just give it back to a long only manager ever again.

DeadFred's picture

It sounds like you're about there right now, right? Tyler's posts have a high degree of accuracy but you have to read carefully for the timing factor. When he correctly states that Greece is doomed that's in March at the earliest. Don't go short until the time is nigh. Some of his recent posts have even been bullish in a hidden sort of way. Record short positions in the euro imply a likely rip in the US stock market. This site likes to point out the side of the news that the MSM shills are paid to leave out but during a bullish trend those will be long-dated facts. This post is a great example. Goldman is telling us that the RUT is going to 765. That could be just a healthy correction in a strong bullish trend. The end of the world stuff is still coming but March, July, November are a long way off if you think in nano-seconds.

I Told YOU So's picture

banking stocks starting to show topping patterns.

ZippyBananaPants's picture

I am sure the minus 1 is from a fellow investor, like me, that owns this pig in the high 30's

trampstamp's picture

I started scaling in yesterday. I don't expect it to go up anytime soon, but it's cheap enough to start scaling in. Man if it hits 5 bucks i'm all in!

DeadFred's picture

When it hits 5 it will be sure to go to to 50 - in a 1:10 reverse split. 3X funds are designed to go down with time so don't hold them long. 

Dermasolarapaterraphatrima's picture



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resurger's picture

Same! am getting a short squeeze at the moment, but i can handle the heat!

SeverinSlade's picture

Are we just about to see a major reversal in market sentiment?  After all, I highly doubt we will begin to sell off ON March 20th.  Perhaps the closer and closer we get to that date without a credible (which doesn't exist unless you allow Greece to simply default) solution, the more and more the markets will sink.

SeverinSlade's picture

Margin hikes in gold and silver coming?  I would imagine so.  Knock them down after Bernanke set the framework for QE3.  Then when the market actually begins to think about a Greek default (and/or the fact that Portugal's 6 month clock is now ticking - and bond holders have much more protection as noted by ZH) selling intensifies and we once again hear how both are "bubbles."  Same old shit.

xela2200's picture

The hikes on the Silver market might not be as a effective anymore or at least at this time. There are some pretty strong hands in the market now.

SeverinSlade's picture

Oh I agree.  I don't think we're going to have a collapse like we did 3 times in 2011.  But they'll try to slow gold and silver's ascent as much as possible.

xela2200's picture

Yeap, I think there is going to be some hiking and dumping (shot covering) on consolidation.

Here is fun video that discusses this point.




peekcrackers's picture

The year of "quadrillion"  

Vincent Vega's picture

'Goldman Recommends'.......BWAHAAAAAAAAAAAAAAAA!

RiverRoad's picture

The croupier spins the wheel and tightens his grip on the stick....

ghostzapper's picture

Obviously this entire thing is a house of cards.


But, that being said I am beginning to seriously feel "they" will simply never let the S&P fall more than 10% or so.  I know, I know it is a total ponzi but with no volume "they" can indeed control the price.  For the record I am neither long nor short just observing and looking for a possible short entry.  Just seems like they are fully committed to ramping ES, EURUSD, and the Dax. 

SeverinSlade's picture

I agree to some extent.  It's all about perception management IMO.

Having the S&P fall 10-15% from 1300+ vs. from 1100.  Falling from where we are presently makes it look like a "correction" or however they want to spin it.  Falling from 1100 looks like a legitimate financial panic.

I think the problems in Europe will drop equities significantly leading up to the March 20th D-day.  We'll have a weak Euro, strong dollar, and weak equities.  Precisely what Bernanke needs for QE3.

RiverRoad's picture

And Goldman et al will siphon off the profits to fund the Fed's bidding and ramp her up again for Obummer's reelection.

xela2200's picture

You know the funny thing is? We know they are lying. They know they are lying. They know that We know they are lying. Still they fool enough sheep to profit from their lying. Just do the opposite of what they tell you to do.

Dick Darlington's picture

So, Russell 2000 has risen 31% since the low in early Oct last year. Seems like a VERY good opportunity to open new long. This is a low ball, even from Goldman. Lol!

In other news while equity comlex is celebrating the alleged daily PSI+ deal btween Greece and it's creditors, bond market is not really feelin' it...


vote_libertarian_party's picture

About time.  My IWM short needs some help from GS.

The trend is your friend's picture

im with you vote, If it weren't for my GLD calls my IWM puts would be ripping me a new one.  I have been scaling out of the calls and buying more puts.  Hopium indeed

thedrickster's picture

Damn, I am long hopium derivative TNA.


DarkestPhoenix's picture

I'm in for another thousand on SRTY with that call.  Wasn't going to put any more in the market, but this is too good to pass up.  Been kicking myself about not jumping on board the times before, which almost guarantees I'll lose on this deal.

Sanksion's picture

All you have to do to win every bet, it is to take a bet contrarian to the GS'advices.

Where is the point ? It is too easy. I wanted some challenges to overcome.

I should be working's picture

Does this mean that a negative GDP print tomorrow is now a sure thing?  How's that 10 year T note short possition looking today?  The bond market is clearly not buying into risk on, I guess now the stock market has decoupled from the bond market as well.

SMFStreetTrader's picture

Goldman can't sell their AAPL to their clients and now they're trying to pump the Russell 2k after it's had a massive move, not buying it