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TheStreet Open House

Chart of the Day: Why Consumer Staples Are Falling Off a Cliff

Stocks in this article: CAT PG

NEW YORK (TheStreet) -- Both the industrial and consumer staples sectors have now technically broken below major, intermediate-term areas of support, according to Schaeffer's Investment Research's senior equity analyst Joe Bell.

Both sectors have been underperforming, with industrials now down nearly 7% for the year and staples down 1.79% vs. the S&P 500's 4.63% rise. Bell said he'd be leery about jumping into either sector in the intermediate term, "especially with the amount of technical strength that we've see in the U.S. dollar."

The declines have been highly correlated with the strengthening dollar in recent weeks, as pictured in the above chart created by Schaeffer's Investment Research. Many of the largest industrial and consumer staples companies such as Caterpillar (CAT - Get Report) and Procter & Gamble (PG - Get Report) have outsized exposures to the international markets, helping drive that correlation. P&G has been particularly choppy of late amid concerns that multinational companies could take a hit in corporate profits if the U.S. dollar were to keep bulking up.

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"Industrials have kind of broken down," Bell said. "If you look at a chart, it's been in a long-term uptrend in the market since 2009, and then in 2011 ... quite a bit of momentum. But then if you look at a daily chart, it's broken up. It's a trend that's been in place for more than year."

Consumer staples have been tracking a "drastically" similar kind of pattern, he added.

"Really, it's kind of falling off a cliff here."

After underperforming for the past several years, Bell said the greenback is on its way up.

"It's obviously going to have a lot of areas of resistance where selling pressure might come in, but if it can clear the $22 area that has been a pivotal area of support and resistance in the past, it will have room to advance even further."

-- By Andrea Tse in New York

Follow @AndreaTTse

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