A Clear Setup Emerges This Summer

Talk about wanting your cake and eating, too. Or, perhaps, in this case: Burritos.

Consumer and retail bulls (as well as small cap bulls) love to cheer for rate cuts, as though that will be some guaranteed panacea for a new leg higher in these stocks. However, history teaches us that rate cuts coming into rising unemployment is a recipe for a substantial consumer slowdown, or at least correlates with one tightly. 

After yesterday's cool CPI, the market is rallying back on a hot PPI print this morning. From my perch, this is much more about a knee-jerk reversion to yesterday's selloff in tech.

In addition, and the central idea for this post, it is much more about near-term oversold retail/consumer names. 

As we noted with Members in real-time earlier this week, names like CMG could easily stage "dead cat" bounces which would merely set up a new leg lower. And that is the crux of my view as a setup emerges into mid-summer: The retail/consumer names, be it the laggards like EL LULU NKE SBUX, or the parabolic stalwart like ANF CMG COST, among others, will soon be ripe to pick off on the short side. 

A consumer slowdown is upon us. And even if we do get those beloved rate cuts it will not immediately help, especially given how stretched some valuations and charts are for retail monsters like Costco. I am looking for shorts into potential multi-day bounces in all of the above-mentioned names as July rolls on. 

As for tech, the Nasdaq is back to about the midpoint of yesterday's big range. I will have more to say about this in my usual Strategy Weekend Video for Members.