Dow shy of 13,000: How long will stocks' surge last?

NEW YORK -- Can the good times keep rolling along on Wall Street?

Despite all the gloom and doom still lingering from the financial crisis, the view through the rearview mirror shows bullish images of a U.S. stock market on the move. Stocks have doubled in value since the bull market began in March 2009. The Dow is flirting with the 13,000 level for the first time since 2008. And the benchmark Standard & Poor's 500 index topped its April 2011 high Friday and is now trading at a new bull market high.

But money is made on Wall Street betting on the future, not the past. And right now investors peering through the stock market's windshield see signs of rally fatigue that could lead to a possible pullback. But professional investors also see a market that could just as easily regain momentum, keep chugging higher and maybe even make a run at the all-time highs set back in October 2007.

After big price run-ups in stocks, such as the S&P 500's nearly 25% jump since October, it is not unusual for investors to wonder if it is too late to get in or whether they should take profits and sell.

The recent rally has been fueled by better news out of Europe, including a second bailout agreed upon by Greece and eurozone bankers, finance chiefs and private investors that Wall Street believes will avert a 2008-style financial crisis. Stocks have also gotten a boost from a slew of better-than-expected economic news in the U.S. that has reduced the odds of a double-dip recession.

"The market has enjoyed a huge relief rally," says Edward Yardeni, an investment strategist and economist at Yardeni Research.

The key question now, he says, is whether the market can continue to move higher once it attains important milestones like Dow 13,000?

"Breaking a big round number is not significant; what is significant is whether the Dow (and the market) can break out above that level or not. If it can, it would inject more confidence that the bull is alive and well, and not ready to keel over. Lately, the bull hasn't really been charging, it has been tiptoeing."

Indeed, the upward momentum has slowed, and many investors have turned more cautious rather than more aggressive.

"The market is due for a pause," says Pat Adams, manager of Dunham Loss Averse fund, adding that it doesn't make sense to buy now after so many individual stocks have enjoyed "parabolic" runs.

Fresh headwinds have emerged. Many money managers believe Greece will need a third bailout at some point. Stocks are nearing levels that have sparked selling in the past. A lot of the better news is already priced into the market, which could prompt traders sitting on big gains to sell and lock in profits. And there has also been a sharp rise in oil prices due to geopolitical fears involving Iran and Israel, which could slow the economic recovery.

"The rally," says Rod Smyth, chief investment strategist at Riverfront Investment Group, "is entering a mature phase."

Still, Smyth says it is possible for the S&P 500 to trade up to 1500 or close to its all-time high of 1565.15. But despite his belief that the gains will continue, he is not currently deploying new cash into the stock market, he says.