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Why the rally may take a breather

The smartest guys in the room are still bullish, at least until January.

In a research note, Goldman Sachs set a year-end target on the S&P 500 of 2,050, or roughly 2 percent from where stocks are now. But the firm doesn't expect the gains to continue at their torrid pace and it's starting to raise flags about high valuations.

So, is the market about to run out of steam?

"We think the market could go up another 5 to 7 percent," said Chad Morganlander of Stifel's Washington Crossing Advisors. "We're quite optimistic about staying long the S&P 500."

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Morganlander noted that he would be concerned if the S&P got to 17 times forward price to earnings. However, there is one key factor that continues to improve. "Keep [economic trends] front and center. They are continuing to move forward and one can argue that they're actually going to accelerate in the coming quarters."

Prime Execution's Steven Pytlar said the technicals show another leg up for the market. "I think the charts are saying Goldman Sachs and [Morganlander] could be right," said Pytlar, who pointed out that 2,050 aligns perfectly with the charts logarithmic trend.

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"What we can clearly see [on the charts] is a very well delineated trend underlying the market. Every time the market falls and touches that trend that's rising, it bounces. And on top of that, we can see that after it's rallied there is a pretty clear trend it hits to the upside and then corrects."

Pytlar added that after the market touches the top of the trend, around 2,050, investors should be cautious, but by the end of the year the market could see the 7 percent rally Morganlander alluded to.

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