The Fallout from Coffee

On a sizable upside reversal in the broad market on the back of Friday's weakness, it is suspicious to see both DNKN and SBUX red. 

Starbucks has been on the consumer leaders in the tape for many years now, arguably the poster child for an American consumer which never admits defeat and begs for mercy even when logic says the consumer has tapped out. 

However, SBUX has been struggling since its last earnings report and, even though it is likely to bounce soon, could still be in the process of topping out. DNKN is still well below its 2015 highs and has yet materialized into the dynamic growth story bulls are expecting.

But beyond that, the continued surge in coffee may be on some level at play. Simply put, the market may be playing the pin action game, with the coffee ETN, JO, below on the weekly, screaming higher again today off a major inverse head and shoulders bottom. 

Going forward, if the bull case in stocks comes to fruition and we do hit new highs, then SBUX and DNKN likely avoid any real downside from here. But if the indices stays rangebound or worse, the continued revival of coffee likely starts to impact those names even more with sympathy selling, regardless of how (il)logical it may be.