This morning's overnight dead-cat-bounce is once again being heralded as the beginning of the end of the carnage that investors have suffered in October. We're not holding our breaths...

"Should we buy the dip?" "Has it gone far enough yet?" As former fund manager and FX trader Richard Breslow notes, those seem to be everyone’s favorite question.

Obviously, the first things that jumps to mind are equities. But the oil and currency folks are asking as well. And for all the talk about how muted the fixed income response has been to the share price melt-down, you can be sure that bond and credit traders want to know the answer as well.

Via Bloomberg,

This week brings to a close a month that certainly didn’t work out as expected. But it is doing it in style. Lots of economic news, some central bank meetings where no policy changes doesn’t mean bereft of meaningful information and a bunch of assets sitting at levels that are potentially important crossroads. Wouldn’t it be ironic, but somehow fittingly apt, if assets that failed to proportionately move with equities did so just when the stock indexes decided to bounce. Or shares bounce just when everything else begins to flash caution.

Credit, despite high corporate leverage, had been remarkably tame.

How can a business cycle end if there are no obvious signs of stress in this sector? Which is why it’s worth keeping an eye on both the investment grade and high-yield Markit CDX indexes.

Both of these measures of credit-default swap prices are in play and look like they are attempting to see how strong are their resistance levels. And both made year-to-date highs at the end of last week. They are near resistance, not clear of it. Risk premia demanded from bonds in these sectors are most assuredly getting pricier. But they’ve had false break-outs before.

Ten-year Treasury yields back below 3% would be a problem. We all know that. And there seems to be a creeping resignation that it is only a matter of time.

It might look close but that is probably misleading. Some chart story can be associated with every basis point. I know it doesn’t feel that way when lugging around positions but the technical outlook to me appears fairly well-balanced with a small upside in yields still showing through on the monthlies. The 5s30s Treasury curve is exhibiting some life. It’s a well-defined trade with support at 34 basis points and getting above ~41 basis points opening up some interesting possibilities.

Gold just can’t seem to make headway above its well-flagged resistance at $1236. Perhaps because it has other hurdles so close above that. To me, it trades like a market that thinks it is meant to go higher but has no verve.

The dollar has been on a bit of a run. It really is a safe haven, even if it’s not popular to say so. But it needs to build up some renewed momentum to carry on. Whether its the dollar indexes, emerging markets or versus the majors, it doesn’t look at all straight-forward at the moment.

As far as stocks are concerned, the Russell 2000 was the leader on the way down, therefore it seems appropriate to start there when looking for next clues.

I like the current set-up from a risk/reward point of view. Last Wednesday and Thursday the index printed just about equal lows. Friday punched through that level making a new extreme for this entire move before rebounding strongly. That’s bullish from a technical point of view. Perhaps more importantly, you can now define, with a little comfort, where your stop should be.