Northman Trader: The bull market is in its final inning – here's why

As investors await the Dow Jones 20,000 with baited breath, one widely followed chart watcher believes the current market rally is actually on its last legs.

On Friday, blue chip shares in the Dow Industrial Average flirted with the psychologically charged 20,000 level, which have largely been driven higher by anticipation over President-elect Donald Trump's business-friendly policies. Yet a few observers think the party is nearly over, and the punch bowl is about to run dry.

"Risk has been priced out of the market," said Sven Henrich of NorthmanTrader.com on CNBC's "Futures Now." Henrich, who is known online as the Northman Trader, said that despite the abundance of optimism on the part of investors, technical indicators could be pointing to some near-term pain.

According to the Northman's chartwork, every time the S&P 500 Index has hit new highs, it eventually retreats back towards its weekly 25-day moving average line, which would translate to a 4 percent pullback from current levels. The S&P 500 has rallied 6 percent since the election, and hit an intraday record high on Friday.

"I would expect that at some point there would be a buying opportunity for people who may want to invest in this market," said Henrich. "But if this line breaks, we may see significantly more downside that we've seen in previous corrections as well."

What's more, Henrich also believes that the S&P 500 has continued to trade in a "bearish wedge pattern" that began just after the end of the last recession. The wedge pattern Henrich speaks of consists of two trend lines: One that runs along the S&P's highs and a second that runs along its lows, that look to meet sometime in 2017. It is at that point that Henrich believes the rally will have run its course, and a downside will soon follow.

On a fundamental basis, the Northman Trader is troubled by "record debt levels" that the global governments have incurred.

"In 2016, the U.S. government ran a deficit of over $600 billion," explained Henrich." "If we now add tax cuts and stimulus spending, you're either going to have to cut a significant amount of programs somewhere, or you're going to end up with an even larger deficit."