One key group of stocks is on track for its worst year since 2008. Here’s what it means

The consumer staples sector is at the bottom of the S&P 500 for 2018 and tracking for its worst yearly performance in a decade. The charts are so bad they might actually be good, says one market watcher.

"Look at the long-term chart, it looks absolutely horrible," said Matt Maley, equity strategist at Miller Tabak, on CNBC's "Trading Nation" on Tuesday.

"It's broken below its trend line going all the way back to the crisis lows of 2009," Maley added. "It's broken below its 2017 low, its 2016 low, its 200-day moving average."

The XLP consumer staples ETF is down nearly 13 percent for the year, trailing the S&P 500's more than 1 percent gain. The ETF has not been able to recover to a price above its declining 200-day moving average since falling below that support level in mid-February.

The charts may look ugly, but the severity of the sector's losses could set the group up for a bounce, Maley said.

"The one thing that we see now is that in the most recent decline, volume has kind of petered out, so I'm starting to wonder if this thing's getting washed out a little bit," he said. "If you look at its weekly RSI chart, it's as [oversold] as it's been since, again, those 2009 lows."

The XLP's relative strength index, a momentum indicator, declined to 28.3 at the beginning of May, but rose back slightly to 36.4 on Wednesday. A level below 30 generally indicates oversold conditions.

"I'm kind of hoping the thing can bounce back a little bit but with so many stocks flat on their back it's hard to be real confident about that," said Maley.

The headwinds facing the sector look difficult to overcome, according to Dennis Davitt, partner at Harvest Volatility Management.

"They've been hit by higher interest rates — people feeling that they're not going to be as attractive so people are moving out of those stocks and moving into maybe just plain old debt-yielding instruments — and higher commodity prices," Davitt said on Tuesday's "Trading Nation."

The XLP ETF was up 0.4 percent Wednesday in its first positive session of the week. The group is tracking for a nearly 2 percent decline for May.



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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 CNBC and 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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