This is 'judgment day' for stocks

Stocks are on the cusp of a major market decision, according to one technical analyst.

After a huge market rout this year that sent stocks tumbling, the S&P 500 has regained the majority of its losses and is down only 1 percent year to date. Now, as the S&P approaches its 200-day moving average, its ability to break above that technical resistance will determine whether or not stocks can keep gaining ground, said Craig Johnson of Piper Jaffray.

"When we broke above this 1,950 level, the pain trade flipped from down to up," Johnson said Friday "There was a quick relief rally right up to this 200-day. But now it's Judgment Day."

After a 10 percent rise for the S&P over the past month, Johnson presents the question at hand as: "Is this a relief rally, or something more?"

Johnson would suggest that it's the latter. To the technical analyst, the recent price action suggests that stocks are on their way to much higher ground.

"The last several times we've seen these kinds of major 'buy' signals with our work, the market's been meaningfully higher," he said. "This 200-day, like a rusty door, is going to get pushed on a few times but then will ultimately yield [to] another leg higher."

The S&P 500 managed to close Friday trading at the highs of the day, and just 2 points above its 200-day moving average. Johnson sees the S&P rising all the way to 2,350 by the end of the year, which would be a 16 percent jump from where the index closed Friday.

However, Larry McDonald of ACG Analytics recommends the exact opposite approach.

"We're in a bear market, let's face reality. You want to buy fear and sell complacency," McDonald said Friday. "Now that happy days are here again [and] everybody is piling back into the market, you want to sell equities and buy bonds."

McDonald said he expects bonds to outperform in the next two weeks, especially following the two-day Federal Open Market Committee meeting, starting Wednesday.