how can I … highlight all the occurrences of this [selection]

The Smart Highlighting options are found in Settings > Preferences > Highlighting. If you turn off “Match whole word only”, then it will allow you to Smart Highlight on part of a word (like the “he” from “the”) or across multiple words (like your example of “it is a test”). The definition of “word” is affected by Settings > Preferences > Delimiter, so you could also add “space” to the word-character list – though that would have unintended consequences that could make it not work as you expect (so probably not a good idea).

Try selecting your phrase and choosing something from this menu: Search > Mark All > …