Last week's away win over previously undefeated competition leaders Melbourne City lifted the Sky Blues to top spot.
Heading into Friday's away game against winless Central Coast in Gosford, Sydney are undefeated in their past 18 A-League and FFA Cup matches, stretching back to February 2017.
But perfectionist Arnold stressed there was still a lot more to come from his side, both individually and collectively.
"Everyone has been performing a little bit under their level," Arnold said.
"But we expect that tomorrow night that we will step up and put on a fantastic performance.
"We analyse every aspect of our own performance, we're functioning on probably 43 per cent at the moment and there's a lot of improvement in each individual and a lot of improvement in the team."
Asked how he could be so specific on how team were playing, Arnold said "with the amount of analysis that we do across every aspect of each player and their performance.
"On the physical side, tactical side, technical side and the possession side."
Polish international Adrian Mierzejewski has made just the one substitute appearance since round two due to a hamstring issue and Arnold is non-committal about whether the midfielder will start on Friday.
"What's important for us is that he gets right and, when he's right, he's ready to play every minute of every game," Arnold said.
"It's not about him coming in with a cameo performance. We want him ready to be able to play 90 minutes every game and we expect that will occur very soon.
"I've been always someone who is reluctant to change a winning team."
The Mariners achieved their first clean sheet of the season last week, but haven't beaten Sydney since 2014.
"We don't fear anyone. We have a lot of respect for every opponent - Sydney is no different," Mariners coach Paul Okon said.
"We're aware of how strong a team they are and the threats they have, but it's an opportunity for us to show that we're up to the challenge."
Okon says if captain Alan Baro doesn't recover from a corked quad, he will be replaced by Liam Rose, who had come off the bench against Brisbane.
Former Newcastle goalkeeper Ben Kennedy, who impressed last week in his Mariners debut, looks likely to retain his place with Thomas Glover still recovering from a shoulder injury.