HYG is in a decisive downtrend with broken support, but a bottom is possible in late October/early November based on cycle timing.

Let's start with the weekly chart for HYG, because the extent of the damage is quite clear in it . The HYG indicator has broken the support level of the cyclical bottom that held firm for most of that structure.

The weekly trend has turned decisively downward.

You can see our reversal indicator is negative and pointing downwards right there. This week's decline has pushed the price to this extension level. This is the extension level of 161.8%.

Earlier this morning, the weekly candle showed a more pronounced lower tail as high- yield bonds bounced with Treasury prices, but as that rally faded, that lower tail shortened.

Therefore, on the weekly timeframe, we have yet to see convincing evidence of a refusal to succumb to selling pressure. The larger weekly structure is still affected. The timing of the weekly cycle still allows for a future bottom.

You can see that we are heading towards that time frame which falls in late October and early November.

On the daily chart, the negative structure is more easily visible . The HYG index has collapsed sharply. It is still far from its 89-day moving average. And look what happened this morning.

We initially got an upward bounce when Treasury yields fell following the employment report, but as those yields rose again, much of that bounce faded. This daily cycle has a negative composition.

The price remains below the declining band, and this cycle continues to move downwards towards an expected bottom, ideally in early November. So, this is an important chart because high-yield bonds are one of the places where we can look for confirmation that high interest rates affect risky assets.