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Since the FOMC decision to cut the fed funds rate 50 basis points and the discount rate another 50 basis points, the market has broken down into two macro categories. Putting this as simply as possible, there are the stocks benefiting from the liquidity and those that, for some reason, are not.

In other words, this recent strength has not been a rising tide lifting all ships. The reason is relatively straightforward. The liquidity that is being introduced is finding its way to just a few select areas that are directly related to the strength in emerging markets.

As we have mentioned at length, this would be the basic materials, large-cap multinational stocks and foreign stocks seeing the most benefits. While there are other isolated individual stocks doing well, too, the rest of the sectors fall into the category of those not benefiting.

The sectors that make up the weaker category are predominately those that are reliant or directly related to our domestic economy and are not benefiting from worldwide growth. The most obvious examples are the consumer-discretionary stocks. The companies selling these items are the first to feel the impact of the consumer cutting back. Despite the accommodative stance of the Fed, consumers remain challenged and still have many of the same problems that existed before the lower interest rates.

Housing prices continue to fall, energy prices remain high, the economy is slowing and there has been a loss of the wealth effect -- real negatives as far as the consumer is concerned. The lower interest rates will take some time to have a positive impact.

The best measure of when this will happen is the market, as it is a discounting mechanism, meaning it anticipates what will happen. The market has not yet decided the consumer-discretionary sectors are ready for recovery, as they have been ignored by buyers of late.

We have spoken of this before, and the situation for the consumer-discretionary stocks remains largely the same as we discussed previously. China's lust for copper, steel or coal isn't going to make the U.S. consumer eat at Bob Evans more often. There are no signs of life yet, and any idea about bargain hunting seems premature. This remains a laggard group at best, and we believe it will continue to underperform in coming months.

Consumer Discretionary SPDR

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The chart of the

Consumer Discretionary SPDR

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remains a largely neutral pattern with continued short-term weakness. The price action has created a topping pattern that has resulted in a decline to the first level of support in the $34-$35 area. So far this has held and a breach of that level would turn the configuration decisively negative.

As far as any upside potential, there is resistance at the $38-$39 price level. It would take a close above that level for the configuration to turn more bullish. For now, we would avoid the consumer-discretionary names and wait for further evidence before making a commitment to them on the long side.

At the time of publication, John Hughes and Scott Maragioglio had no positions in the stocks mentioned. Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.