After surging on vaccine news, the stock market is more likely to stair step higher as the increase in virus cases competes with the promise of a more normal economy in the coming year.

The S&P 500 rocketed higher on Pfizer's Nov. 9 announcement that its vaccine was highly effective, and that it would be broadly distributed by the second half of next year. The S&P that day touched a record 3,645 on an intraday basis before closing at 3,550. It has since moved higher, and was at around 3,600 Wednesday, but not back to its intraday high, even after Moderna also announced positive vaccine news on Monday.

"The market is in a balancing act right now. We can look ahead six to 12 months and see several of the vaccines may be widely available and administered, and we may start to back to normal life," said Ed Keon, QMA chief investment strategist. "At the same time there are going to be a lot of challenges as the disease works its way through the population."

The market has been trading on those two themes, with cyclical stocks going higher and momentum and big tech lagging. Many of those names, like the FANG stocks, have been the ones that benefited most when the economy was shut down and led the stock market out of its March slump. Now, those that were punished, like airlines, energy and cruise ships have been moving higher at a faster rate.

"I still think we're in a very powerful bull market, and people should be careful about getting too cautious," said Robert Sluymer, technical strategist at Fundstrat. "Just remember we had a pretty big move in the S&P 500 from fairly oversold levels on Oct. 30... We just had a surge. A lot of short-term indicators are overbought."

Sluymer said it is as if the market sectors are in a relay race.

"Leadership can pass the baton from time to time within a bull market," said Sluymer. "One group leads, and then another group leads. While the structural leadership in growth had a massive surge in Q2 into the summer, a lot of those stocks are now pausing."

That would include Amazon and Netflix, which have not recovered their early September highs. Facebook is trading below its August high, and Peloton has declined since mid-October.

"A lot of people are making a case that these are at massive tops. I don't see evidence of that. They look like they are in very normal, intermediate consolidations," said Sluymer. He sees scope for both growth and cyclicals to move higher, and points out that cyclicals have moved above the highs they hit on the Pfizer

For instance, Sluymer said the Financial Select Sector SPDR ETF and the Energy Select Sector SPDR Fund ETF XLE both surpassed their Nov. 9 intraday high.

"I look at names like Amazon and Netflix and my guess is they're going to be in buyable positions as we get to the end of the year, or early next year," said Sluymer. "Participation is broadening out to deeper cyclical areas. But there's nothing wrong with taking a break. Your best players sit on the bench every once in awhile."

Sluymer said he also sees potential for a pullback, but expects only shallow sell-offs for now.

The positive vaccine news has coincided with Wall Street's release of new 2021 outlooks, and the strategists are bullish. A number of them see double digit percentage gains in the S&P 500. Credit Suisse announced a 4,050 S&P target Wednesday, while Goldman set a 4,300 target last week and JPMorgan was at 4,500. Citigroup set a target of 3,800.

"One of the oldest things on Wall Street is buy on the rumor and sell on the news," said Keon. "In this case, we got a huge run up on the news but then at some point the market absorbs it...It's going to be a very tricky next six to 12 months. The market is willing to look past it, but it will vary from day to day. There will be a piece of bad news, a piece of good news. It will work its way higher, but it will be in fits and sats. We think we'll see more rotation toward more value stocks, more cyclical stocks, especially when you get clarity about when the vaccines are going to be widely distributed."

Some of the stocks that did well during the pandemic could retain their leadership.

"There's a split between companies that pulled demand forward because of the pandemic and those that accelerated technological disruption as a result of the pandemic," said Keon. "In some cases, I think we changed the way we do business and in the way we live our lives."

Keon said profits have been recovering surprisingly well, and some companies have managed to achieve savings that could set them up for future strength.

But he too sees the potential for market pullbacks. "Markets pause all the time for any reason...markets hit air pockets all the time. We're going to get negative news on the virus for months to come," he said.