The consumer staples sector just did something it hasn't done since the financial crisis

The staples are sinking, and it's giving one trader flashbacks to the financial crisis.

Last week, the consumer staples sector posted a 4 percent decline, its third in two months. That's a phenomenon that hasn't been seen in nearly a decade.

"We hadn't had a cluster of weakness that tight since the '08, '09 lows," Frank Cappelleri, senior equity trader at Instinet, told CNBC's "Trading Nation" on Monday.

That "suggests that a long-term character change could be afoot, which makes me suspicious of anything more than a bounce for now," he added in comments to CNBC.

Steep weekly declines have occurred on the XLP consumer staples ETF since the financial crisis, but this year's frequency sets 2018 apart, Cappelleri said.

"Before this year, there were four different times when we saw a weekly decline of 4 percent or more — that happened in 2011, 2013, 2015 and 2016," he said. "But obviously that didn't alter the uptrend nature in the XLP. Now that's a big difference to what happened recently."

On the bright side, the rapid pace of sell-offs could be setting consumer stocks up for a bounce, at least in the short term, he added.

The XLP "did not hit oversold levels at least as of yet which is a complete difference to what we saw in February and March, so that's a minor positive divergence which typically sets up a countertrend move," Cappelleri said.

Consumer staples stocks traded in overbought territory at the beginning of the year but fell sharply into oversold levels during the early February sell-off on broader markets. The XLP's relative strength index, a measure of the overbought or oversold conditions of a security, currently trades at 32. A reading below 30 indicates oversold territory.

The fundamentals picture is also growing more hostile for the sector, said Gina Sanchez, CEO of Chantico Global.

"When there's a low-interest rate environment you have really solid groups like consumer staples that are great because they're dividend payers," Sanchez said on "Trading Nation" on Monday. "We are now in a meaningful uptrend in terms of interest rates, and I think that's just going to be a huge headwind for this entire sector."

The yield on the 10-year Treasury bond rose to above 3 percent on Tuesday for the first time since January 2014. When rates rise, as they have done, so-called bond proxies such as consumer staples typically fall.

"Looking at it on a go-forward basis you sort of have to consider that that dynamic has fundamentally changed," said Sanchez. "You might have some short-term bounces, as Frank suggested, but I think the longer term is going to be a lot more challenged."

The XLP ETF was down 0.9 percent on Tuesday, setting up for its fifth session of decline. It is down 12 percent this year, easily the worst-performing sector of the S&P 500.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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