Spending copious amounts of time in cars, airports, and airplanes generally provides the opportunity to take a step (or three) back from the blinking screens (although to be honest it is pretty easy to check in on the market via an iPhone these days) and regain a feel for the big picture.

As is oftentimes the case, the state of the current market can be summed up with one simple question. After an impressive bull market run, are stocks now setting up for the traditional "blow-off" top or has the run become so extended that the indices are primed for a bearish blow-up?

What Is The Message From The Charts?

While there are almost always opposing opinions from the bull and bear camps, one can usually settle the argument by looking at the charts of the major stock market indices. So, let's take a peek at some charts and see if a consensus can be reached here on the overall state of the market.

S&P 500 Daily

Rarely is a line of resistance as evident as it is now. Whether you use paint, a fine writing instrument, or a crayon to draw it, the "ceiling" at 1850 on the S&P 500 is pretty darned obvious.

What's interesting here is that the 1850 level now acts as a trigger point for the so-called fast-money types. For example, on Wednesday, the market was busy movin' on up and things were looking pretty good right up until the old highs at 1848 were broached. Then, with the help of the terrorist threat level being upgraded due to a "credible threat" as well as the usual bevy of Fed-speak, the indices quickly succumbed to sell programs. Then, once the "reversal" was recognized by the algos, it was all downhill from there. And this, dear readers, is what the term "overhead resistance" is all about.

Of course the bulls will argue that the resistance zone around 1850 will prove temporary. "Just look at the action in the NASDAQ," we're told. "Leaders lead!" appears to be the battle cry here. But a quick glance at the chart does seem to support the argument that it's only a matter of time before the bulls will ultimately prevail.

NASDAQ Composite Daily

In looking at the chart above, as long as the NASDAQ stays above 4240 or so, the odds would seem to favor the bulls.

Or do they? Check out the charts of the Russell and the DJIA!

Russell 2000 Daily

Dow Jones Industrial Average Daily

So... While bull markets, like beauty, often lie in the eyes of the beholder, the jury appears to be out on whether or not the next short-term move will be up or down. A meaningful move above 1850 on the S&P 500 would certainly suggest that the bulls would be in control of the ball. And at the same time, a serious break below 4220 on the NASDAQ would seem to auger well for the bears.

What Then?

Assuming the bulls can break on through to the other side of the current resistance zone, the next question will be whether or not a "blow-off" top is at hand. Some analysts argue that the current bull move is growing long in the tooth and that any further rally from here might be fraught with risk.

S&P 500 Monthly

But as the saying goes, isn't a market that is making new highs positive by definition? Wouldn't a break above the current wall of resistance suggest that a new leg higher was underway? And isn't the combination of an improving economy, strong earnings, low rates, and a low inflation environment positive?

Yes, Virginia, all of the above are positive inputs. However, it is also important to recognize that all good things come to an end eventually. Even if the economy doesn't roll over into recession (remember, the primary cause of bear markets has historically been a recession) bear markets tend to crop every once in a while.

Watch Further Rallies VERY Carefully

So, given that the S&P has gained nearly 180% since March 9, 2009, it wouldn't be terribly surprising to see the bears run with the ball for a while at some point. This is especially true since it is year two of the Presidential cycle, which have historically not been great years for stock prices.

To be sure, we are not calling for a bear to begin and we are most certainly not suggesting that anyone run for cover at this time. No, we will let our objective indicators tell us if/when the environment weakens to the point where a serious decline may be probable.

But until then, investors should watch the action closely - especially if the market rallies from here. You see, the final stages of a bull market typically are defined by narrowing leadership, divergences, and weaker-than-average momentum - even if the major indices are making new highs in the process.

Put another way, we need to be cognizant of the quality of any rallies from here. Because anything that is sub-par on this score could turn the blow-off into a bearish blow-up very quickly.

Positions in stocks mentioned: none

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program.

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