IWM has significant technical damage and a negative weekly structure; short-term rebound expected but likely to reverse lower in mid-October.

We will discuss why this is important for stocks, and then we will follow this relationship in high-yield bonds and the Russell index, where we have seen much greater technical damage than we have seen in the S&P and Nasdaq indices.

Now, we will move from high-yield bonds to the stock market, starting with the Russell index. This is the Russell indicator on the weekly timeframe. It has suffered far greater technical damage than the S&P or Nasdaq indices.

The cycle structure has turned negative. You can see that a few weeks ago we broke that support level for the cycle, and that represented a very extreme leftward bias, and it is now negatively primed and declining.

So, you can see that we are now entering some key support levels below the market. This is an area where we can look for a response , but at this stage, a bounce off support levels does not necessarily mean a fix for the weekly structure.

We need to see the price start to recover resistance, and the weekly momentum picture improve before we can say that this damage has been repaired.

Now, we will move on to the daily chart. Therefore, the daily chart gives us a similar distinction between today's bounce and this larger weekly structure. The Russell index rose sharply this morning as Treasury bond yields initially fell.

It still retains some of that gain, despite retreating from its earlier high as Treasury yields have begun to rise again. Even with today's gains, the major technical damage has not been repaired .

We have a price that is well below the 89-day moving average. We have negative momentum with both the "Reversal Scout" indicator and the "Slim" bar. You can see that we are getting a bounce that is perfectly in line with this inconsistent daily cycle here, but this larger cycle has a leftward bias as it peaked here and is taking a negative shape.

We expect this rebound to continue perhaps for a few more days and then eventually reverse to fall towards this time window. The ideal daily cycle timing window is from October 8 to October 15.