The U.S. stock market appears to be on the verge of a significant downturn, a situation that has been brewing long before tariffs were identified as a major threat to investors on Wall Street. Despite major stock indexes continuing to rise, warning signs have accumulated beneath the surface for several months. The S&P 500, for example, achieved an all-time high of 4,500 on February 19, while both the Dow Jones Industrial Average and the Nasdaq Composite reached their peaks back in December.

Interestingly, while these major averages celebrated new heights, the breadth of the market revealed troubling signs: a declining number of stocks were propelling the indexes upward. According to financial analyst Carter Worth, founder of Worth Charting, the strength of the market was misleading. 'We've been in trouble for months and there's more trouble ahead,' he stated. 'The market was deteriorating well before the actual peak, internally, in terms of constituents.' He argued that the real story lies in the tumultuous trends occurring beneath the surface of the market.

A deeper analysis conducted by Worth Charting shows that the declines among individual stocks were significantly more pronounced than the overall market decline itself. As of March 30, the U.S. stock market was approximately 9.6% away from its 52-week high. However, the median U.S. stock was found to be about 27.7% below its 52-week peak, with the average stock down 32.3% relative to its one-year high. 'You have bifurcation,' Worth explained. 'You see a huge number of stocks starting to roll over early, while the index continues to rise, buoyed by a few holdout companies. Eventually, even those holdouts succumb to the market's pressures.'

As investors looked ahead to 2025, many entered the year with high hopes for double-digit earnings growth not only from technology stocks but also from a broader range of sectors. Analysts anticipated that 455 companies within the S&P 500 would report positive earnings growth in 2025, a notable increase from the previous year when only 357 companies achieved year-over-year growth, according to LSEG. LPLs chief technical strategist, Adam Turnquist, emphasized that while optimism was rampant, the market leadership has remained lackluster.

Indeed, strategists have been warning about signs of froth in the market for some time. Bank of America raised red flags in December regarding the S&P 500's valuation, indicating that its price-to-book ratio had surpassed the previous high set during the dot-com bubble in March 2000. Moreover, momentum in tech and semiconductor stocks began to wane in the middle of the previous year, indicating a decline in enthusiasm for key market drivers.

Despite the strong performance of the so-called 'Magnificent Seven' tech stocks throughout the end of 2024, the reality is that companies like Microsoft and Nvidia have seen their stocks drop significantly in recent months. Microsoft, for instance, is down over 21% since reaching its peak in July, while Nvidia's stock has plummeted by 32% since peaking in January. The Dow Transports index also reflects a downturn, having dropped 24% since its November high.

A pivotal indicator, according to Worth, occurred at the end of March when the Russell 3000's 150-day moving average flattened out for the first time in two years. This trend signifies a structural bear market, posing new risks for investors.

Adding to the prevailing sense of caution among investors is the recent surge in gold prices. Traditionally, gold serves as a safe haven during stock market declines, and this years spike has underscored a risk-off mentality among traders. Heightened global trade tensions have pushed gold prices above the $3,300 per ounce mark, a significant milestone. Worth described the current gold rally as 'hysterical,' noting that its monthly relative strength index (RSI) has exceeded 86 this week. Such high RSI levels have only been recorded four times since 1975, often leading to subsequent double-digit declines in the following months.

'This is a period of uncertainty,' Worth remarked, highlighting geopolitical risks and the threat of stagnation. 'This environment does not warrant an expansion of the price-to-earnings multiple; rather, it suggests that investors should pay less for stocks. The fever is broken.'

In light of the current market dynamics, CNBC is encouraging investors to gain valuable insights through its inaugural CNBC Pro LIVE event at the historic New York Stock Exchange. Scheduled for Thursday, June 12, this exclusive event will feature interactive clinics led by industry experts, alongside networking opportunities with CNBC talent and other subscribers, making it a must-attend for those looking to navigate these uncertain waters.