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Watch this stock market indicator: Art Cashin

Cashin: Draghi's real problem

Investors should look to small-cap stocks as an indicator of the market's direction, veteran trader Art Cashin told CNBC on Tuesday.

The stock market tumbled in early trading Tuesday after the International Monetary Fund downgraded its global growth forecast for the remainder of the year, as well as 2015.

Read More'Weak and uneven': IMF cuts global growth forecast

"People are saying that, you know, [it's] going to give [Fed Chair] Janet Yellen more room and we're just moving them down," Cashin, director of floor operations at the New York Stock Exchange for UBS, said on "Squawk on the Street." "The question is, how low will they go?"

The Russell 2000, which tracks small-cap stocks, has been "very sensitive," Cashin said. On Monday, the index failed to surpass Friday's high of around 1,109 points and then led to the downside, he noted.

Art Cashin
Adam Jeffery | CNBC

Going forward, the key level to watch on the Russell is support of 1,090, Cashin said. Should the index fall below the 1,070 level, though, it could tumble much further, he said.

Turning to the bond market, the yield on the 10-year Treasury bond could fall to 2.2 percent, according to some projections, Cashin said.

Separately, traders will look for third-quarter earnings results and guidance for the fourth quarter, Cashin said. Nine S&P 500 companies are scheduled to report earnings this week.

"I'm not seeing companies coming out and changing things, but I am seeing several analysts coming out and talking about the fourth quarter being slower than people think," he said. "And on the back of this IMF thing, I think there are going to be some questions."