Exiting XLP (Consumer Staples)

We are closing our position in XLP today. Since entering the position we have seen prolonged relative weakness and with this week's trading, price has broken down below its 20 WMA, the prior breakout level and Relative Strength has failed key long term support.

Something interesting about this exit is that the market has seen some weakness recently and usually when the market is weak investors flock to the safety names like the Consumer Staples. We have not seen that this time however and they seem to be getting sold the hardest. That either means investors are willing to stick with more risky names and the market will continue higher, or that stocks accross the board are seeing liquidation and an even deeper correction may be on the horizon. When Staples sell off it means one of two things:

1. Investors are leaving lower risk, safety stocks, in exchange for more risk appetite and bigger gainers (Bullish for the Market)

2. Investors are dumping everything and even the so called "safety" stocks are too risky for the current environment and feel cash/bonds are a better bet to weather the storm. (Bearish for Market)

**also though it is possible that what we are seeing in the Staples, as well as Utilities and Bonds, is the effect of higher interest rates on those typically high income generating investments. If rates rise, people can gain more money on their general savings accounts and may be inclined to take less risk in the market.

As of now we do not fully know what scenario we are dealing with in regards to investors risk appetite. Being that the market is just 2% below all-time highs and the market leading sectors are still the offensive groups, I am inclined to give the benefit of the doubt to the Bulls and the uptrend here. We will monitor this closely going forward and as always, I will keep you posted to any new developments.

Here is the weekly chart of the XLP. You can see why we are exiting. We have a flattening and broken 20 WMA along with a failing RS trend support that has been in place for more than 2 years now.