The resilient stock market is flashing warning signs

Recent market data reveals warning signs for the resilient stock market. Downside volume on the New York Stock Exchange has increased to 54% of total volume, nearing yearly highs, according to BTIG technical strategist Jonathan Krinsky. Small-cap stocks, as measured by the Russell 2000, have dropped more than 5% from their peaks.

This has happened 12 times since 1996. Forward returns for the S&P 500 are mixed, but the Russell 2000 is down about 2.1%. The market's resilience is being tested by rising oil prices, higher US Treasury yields, and a potential additional Fed rate increase before year-end. Despite this, the broader market remains within 3% of its all-time high of 7,798.99 set in August.

Tech-heavy mega-cap stocks continue to anchor market stability, contributing to an 11.7% gain for the S&P 500 year-to-date. Factors supporting the market's proximity to record levels include strong performance from key tech players and confidence in sustained corporate earnings growth. Truist chief investment officer Keith Lerner advises staying aligned with the primary market uptrend, while underweight investors may consider adding exposure to growth areas like tech.

A deeper pullback could present an opportunity to become more aggressive. Brian Sozzi, Yahoo Finance's Executive Editor and host of the Power Players With Brian Sozzi podcast, offers these insights.