Stocks as of this Buzz post (2:15 p.m. EDT) are ripping higher, with oversold US small caps bid up the most. Traders looking at their high beta trades may think things are all clear now, but this is a highly defensive environment. Utilities, health care, and consumer staples are all up powerfully in a way not suggestive of confidence in the general move higher. Long-duration Treasuries are also well bid. Don't discount the importance of this leadership potential. In the 2014 Dow Award-winning paper "An Intermarket Approach to Beta Rotation," my colleague Charles V. Bilello and I show why utility stocks in particular are historically a harbinger of higher volatility. Does that guarantee a correction? Of course not, but if Friday's payroll report is weaker than estimates, which bonds seem to think will be the case, the defense playbook will end up being the best way to start the second quarter.
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