Bulls are likely to take another swing at the S&P 500 closing high this week, but the real battle will begin after that.
The S&P 500 closed at 1563, just 1.38 points away from its closing high, but still well below the all-time intraday high of 1576.
"What's important is how we handle that area. Do we push through it and close on our highs and open the door to 1600, or do we kiss it and back off?" said Scott Redler of T3Live.com. "It feels like it's going to go through it. It's just whether it can hold and get some more momentum into the tape."
Shaking off worries about Cyprus Tuesday, the Dow also rose, ending the day up 111 points at 14,559, a record. Better durable goods orders was also a catalyst and helped give oil prices a push. Energy stocks were among the best performers, up 1 percent as oil prices rose. West Texas Intermediate jumped more than 1.6 percent to a five-week high above $96, while Brent rose above $109 per barrel on better U.S. economic data.
Market direction is at the heart of the debate between bulls, who think the market's record setting run can continue, and those who think stocks need to pull back before they can gain much ground.
Jeff Kleintop, chief strategist at LPL Financial, is in the latter camp, and he said the market looks like it's topping.
"We've had 13 of the last 16 weeks have been up for the stock market," he said recently. "We haven't had that since 1989. It's that overextended."
Kleintop said the market has seen a similar pattern of early gains before a spring slide in recent years, and he's looking for a pullback in the near future. "If we get that five to 10 percent pull back…I think we'll rebound back to the highs and maybe make a new high for the year in the second half. As our housing data holds up and job growth continues to improve in the U.S. and maybe with that we'll see companies spending a bit more."
(Read More: Beyond the Numbers, Confidence Returns to Housing)
Kleintop, in a note Tuesday, listed factors that preceded spring selloffs in the last couple of years. The first was the withdrawal of Fed stimulus, which is not expected to be an issue this year. But one thing he sees as a possible issue is earnings disappointments. In the past few years, earnings estimates moved higher heading into the first quarter but then declined as guidance disappointed. He points out, however that expectations have not risen as much as in past years and that could limit the disappointment.
"We only expect earnings to grow one percent in the current quarter. Consumers, we've heard from retailers, are just not spending much, even though we're seeing better jobs numbers, gasoline is also sapping some of their spending power," said Kleintop.
Even though he expects some bumpiness, he said he sees home builder stocks as a buy as well as industrial companies. "I think individuals have been underinvested for a long time. This isn't about selling at the top. They need to look for opportunities to buy. The worst thing they could do is buy today and five weeks from now the market is down five or 10 percent," he said.
Redler said the market is now at an important inflection point – with possible record levels coming at the end of the quarter. "Every time we've come to an inflection point, it raises anxiety. You have people not long and you have people who are short. Whenever that happens it's anxiety provoking. We're running out of points of reference," he said.
Redler, who follows the market's short term technicals, said he's net long and trading for the market to go higher. "A close above 1565 opens the door to that 1576 level sooner rather than later," he said.
He said the market's action Tuesday was not appealing to traders so much because financials and technology stocks were not leading, as they did in February.
"This stage of the rally doesn't feel that good to traders because it's not being led by the banks. Banks are retracing, and it's not being led by high beta tech. It doesn't have the heart beat of a rally when it's led by defensive sectors," he said. Health care was Tuesday's best performing sector, up 1.2 percent. The worst performers were industrials and consumer discretionary stocks.
(Read More: Cash Move, New Products Will Send Apple to $600)
What Else to Watch
Pending home sales are reported at 10 a.m. ET Wednesday. EIA oil inventory data is released at 10:30 a.m.
There are also a number of Fed speakers, including Boston Fed President Eric Rosengren, who speaks on the economy at 11:30 a.m. in New Hampshire. Cleveland Fed President Sandra Pianalto speaks at 12:15 p.m. on monetary policy, and Minneapolis Fed President Narayana Kocherlakota speaks at 1:30 p.m. on improving the economic outlook with monetary policy.
here is also a 1 p.m. auction of $35 billion five-year notes.