Last Friday I reviewed some of the bearish signals that were casting dark shadows across the US stock market. This week’s trading activity through Tuesday isn’t helping. Drawdown for S&P 500 as of yesterday (Sep. 29) has slipped deeper into the red, falling to -11.6%. The slide below the -10% mark triggered another red signal for the Crash Risk Index (CRI), which is again flirting with a clear warning—five of its 10 components are in the danger zone. Another leg down in the market would tip the scale decisively into the red (assuming that the current profile hasn’t already sent you running for cover).

CRI reached the midway mark briefly last month, but the threat receded a bit in the following weeks on the back of a modest bounce in the market. But after the latest round of selling, the S&P’s profile has weakened further.

The main source of optimism (perhaps the only source) is the lack of clear evidence in the hard data for calling the start of a new US recession. The numbers through August continue to point to a positive macro trend for the world’s biggest economy and the early clues for September still look encouraging. A markets-based estimate of business cycle risk has been raising doubts about the US economy lately, but for the moment there’s no smoking gun via a broad measure of formal economic indicators.

The question is whether the troubling signals emanating from the capital markets—falling stock prices and Treasury yields in particular—constitute a reliable forecast that the jig is up for the US recovery that’s been in force since mid-2009?

Alternatively (and somewhat desperately) we can argue that the US equity market may be caught in one of its corrections/bear markets that isn’t accompanied by an NBER-defined recession. Is such a distinction even relevant from an investment perspective at this point? Maybe not, although ongoing economic growth will, in theory, 1) keep any market correction from going off the deep end; and 2) lay the groundwork for a market rebound that arrives sooner rather than later. That may be a thin reed for some folks, but the outlook is considerably darker beyond what we already know if the US economy gives way. Indeed, with monetary policy still generally in stimulus mode, a new recession in the current climate would be unprecedented, which is to say unusually risky. But that’s an issue for another day.

Meantime, a conservative investor with a relatively low risk tolerance can’t ignore the troubling market signals that have been accumulating in recent weeks. Sure, it could all turn out to be a false warning. In fact, that’s a reasonable assumption if the economic trend for the US stays positive, which is still a reasonable forecast. But for investors who can’t afford to suffer the consequences of being wrong, there’s a growing if not decisive case for adopting some degree of a defensive stance in the portfolio mix.

In short, the case for optimism by way of the stock market is hanging by a thread. By some accounts the thread has already been cut. A debatable point? Perhaps, although further declines in the S&P in the days ahead will effectively end the discussion in favor of the bears. In that case, the only mystery is whether the business cycle follows the market off the cliff.