Art Cashin, UBS director of floor operations at the NYSE, said markets are acting with mild reassurance the Federal Reserve will not make any drastic changes to its policy stance Wednesday.
Wall Street has been debating whether the Fed will alter language in its policy statement that may shift the timing of the first interest rate hike.
"The big picture is going to be what happens with the Fed tomorrow at 2 o'clock [EDT] and what does Janet Yellen say about what they did, which will be critical," Cashin said.
The Dow Industrial Average rallied to a record high midday amid expectations the Fed will maintain its dovish stance and not deliver any surprises. That caused bond yields to drop, giving lift to rate-sensitive stocks like emerging markets, REITs and utilities.
"The Russell is of concern," Cashin said. "Going back to when the Fed talked about markets being stretched, it was most of the players in the Russell that they thought of."
The Russell 2000, which consists of small-cap stocks, is approaching a key technical level, dubbed the "death cross," that has market-watchers wary. Its 200-day moving average is close to breaking through its 50-day moving average on the upside, which signals a bear market may be on the horizon.
The index is considered a gauge of the U.S. economy as its constituents generate most of their earnings from inside the U.S.
"On the macro scale, we're all worried about Europe and whatever, so they [Russell 2000 stocks] actually should be doing better than they are," Cashin said. "The weakness is concerning, and it does look like if the bears are going to have a day, if they're going to make things break, it will be the Russell they'll use as a vehicle."
—By CNBC's Kristen Scholer