Don't look now, but bad news continues to be bad news. Investors are grappling with the Fed's guessing game, and where they want to have the greatest exposure during the next leg of the stock market rally.

The dilemma reflected in this morning's PMI data underscores why there are so many divergent opinions about the economy and the Fed's next move. 

Chris Willaimson, chief business economist at S&P Global, said, "This soft-landing scenario looks less convincing."

This morning, the July Chicago Fed National Activity Index came in far below consensus, and June was revised lower. The economy is weaker than the experts tell us it is, that is why I worry the Fed will blow it with respect to rate cuts. 

Today, we see Consumer Discretionary giving up a lot of yesterday’s gains after more retailers came up short of consensus and warned of tough times ahead. 

Look at the biggest decliners in the overall market, the list is littered with retailer names. 

Consumption is 69% of the economy and even under tough economic conditions there are retail winners and losers. The focus is on inexpensive items and management execution.