The outperformance of traditionally defensive sectors including consumer staples exchange traded funds this year suggests more potential downside for equities.

ETFs tracking sectors that investors use to play defense in uncertain markets have been the top performers in 2011. [Defensive Sector ETFs Still Leading in 2011]

“The defensive rotation is gathering steam,” said Tarquin Coe in an Investors Intelligence newsletter Friday.

“At a similar pace to the fall of 2008, the Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP) is accelerating on a relative basis against the SPDR S&P 500 ETF (NYSEArca: SPY),” the technical analyst wrote. “The ratio is trending towards the high from 2008 and if that’s the case it implies the equity market discounting has several more weeks to run. Consumer staples are not totally immune to the rout but on the whole outperformance is guaranteed.”

The consumer staples ETF is up 2.6% year to date, compared with an 8.2% decline for the S&P 500, according to Morningstar.

Top holdings are Proctor & Gamble (NYSE: PG), Philip Morris (NYSE: PM) and Wal-Mart (NYSE: WMT).

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.