As defensive trade breaks down, trader sees one patch of safety

The safety trade is acting like anything but this week.

Defensive sectors health care, staples, REITs and utilities have plummeted this week, offering no real shelter from a broader sell-off.

Bill Baruch, president of Blue Line Futures, said the downturn has taken no prisoners.

"There's been systematic selling across the board," Baruch said Thursday on CNBC's "Trading Nation." "For about two months you're seeing the death cross from index to index, you're seeing a portion of the Treasury yield invert, now you're seeing the Dow take out February lows, you're seeing the Nasdaq get near February lows."

The Dow entered a death cross earlier this week, a technical move where its 50-day moving average moves below its 200-day moving average. The S&P 500 and Nasdaq entered their own earlier this month.

There is one corner of the market that could offer some protection from further downside, said Baruch.

"I've been pounding the table on being long Treasurys," he said. "I'm looking at the TLT and there may actually be a golden cross down the road where you get the 50-day moving average move out above the 200-day."

The TLT 20+ year Treasury bond ETF tracks the prices of bonds with long-term maturities. The ETF's 50-day moving average, a measure of short-term trend, has been on the upswing since the beginning of December.

"It broke a long-term downtrend from 2016 and I think there's upside here to about $127," Baruch added.

Stacey Gilbert, market strategist at Susquehanna, said that intense selling pressure presents an opportunity for long-term investors to take advantage.

"If your thesis is longer term, one year, two years out, this could be a great time to look for individual names," Gilbert said Thursday on "Trading Nation." "The idea of picking names, being more of an active manager as we enter the next two years is going to be incredibly important."

While the S&P 500 has plummeted 11 percent this month, a handful of its components have eked out gains, including AutoZone, Broadcom and Kimberly-Clark. Stocks such as AMD, Red Hat and Chipotle remain sharply higher for the year.


Trades to Watch

Trader Bios


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

Read more