What's next after a wild week in the market

Will stocks be naughty or nice?
Will stocks be naughty or nice?   

After a week of high-octane turbulence, stocks have a good chance of drifting higher in the week ahead, giving the year a bullish finale.

Stocks most often gain in the month of December, so many analysts expect the year to end on a high note, barring external jolts, like the one from Russia in the past week.

In the last 10 years, the S&P 500 has been higher 80 percent of the time in December, with the final two weeks particularly strong, providing an average gain of 1.6 percent.Catch-up buying by fund managers and other year-end buyers is expected to provide support for a market that has pivoted around the price of oil for the past several weeks. Pressure from falling oil prices eased in the last few sessions, as traders appeared to believe the worst was over for crude prices for now.

Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

Another positive boost for stocks came from the Fed after its meeting Wednesday, when Fed Chair Janet Yellen boosted confidence that the economy is improving, while reassuring markets the central bank is not planning to move quickly to raise rates.

"There's so much pain in the energy trade already, it may not be (a hurdle) anymore," said Tobias Levkovich, chief U.S. equities strategist at Citigroup.

Levkovich said the market's surge in the past week was in part due to a massive short squeeze. "We think some of the rally stuff we're getting is borrowing from next year," he said.

In the coming week, trading will be compressed into 3 ½ days because of Thursday's Christmas holiday and an early close Christmas Eve.

Read MoreBlackrock's Rosenberg: Stocks will beat bonds in 2015

The S&P 500 and Dow were more than 3 percent higher in the past week, after wild seesaw trading drove the Dow down a little more than 200 points in the first two days of the week , before soaring 735 points in the last three days of the week. Friday's gain was muted with the Dow up 26 at 17,804, and the S&P 500 9 points higher at 2,070, five points below its all-time closing high.

Read MoreOil seeks bottom

Buffeted by the expirations of options and futures, stocks and oil traded violently in both directions. West Texas Intermediate oil futures for January closed at $57.81 per barrel, a decline of 2.2 percent for the week.

Crude's January contract was taken off the board Friday afternoon, and February's WTI contract traded higher, above $58 in late trading. While stock traders made bets based on oil bottoming, energy analysts say crude may have more selling ahead of it, particularly in late winter when demand drops.

Read MoreU.S. oil soars on short-covering

Outlook for the new year
Outlook for the new year   

What to Watch

There is a batch of important data in the coming week, starting with existing home sales Monday, then the third look at third-quarter GDP, durable goods and personal consumption Tuesday, and weekly jobless claims on Wednesday.

"The consensus is GDP is up a few tenths, 4.2 percent with another upward revision," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi. "It's really more important to see what's going on with the fourth quarter. It almost feels like Fed officials need to see 3 percent GDP to inch closer to rate liftoff."

For that reason, he is focused on Tuesday's personal consumption and spending and the inflation gauge within that indicator. "Yellen said actual inflation isn't that important. It's the outlook. I don't think the market buys that. The market is thinking there's some kind of deflation out there. We want to see what the PCE/deflator, the core is going to do on Tuesday," said Rupkey.

The Treasury curve continued its flattening move in the past week. The two-year note was yielding 0.638 late Friday, and the 10-year was at 2.16, up from the 2.10 it was at the week earlier.

"The best economy in the world has the highest yields. It's bringing in some buying," Rupkey said. "The yield curve runs mostly off of the expectations for Fed policy. It is still flattening since the Fed meeting Wednesday. The market seems to have the message that the Fed is going" (to hike rates).

The market generally expects the Fed to raise rates from zero for the first time after the first half of 2015.

Levkovich said the stock market should not run into problems when the Fed makes its initial hike next year, and he expects the S&P 500 to reach 2,200 by the end of 2015.

The decline in oil should be a net positive, he said. "My concern about energy is not about (lost) jobs," he said. "My focus is mainly around the idea that if credit markets get disrupted enough by it, does it raise the cost of capital for everybody. … We don't want a leaching out of higher capital costs to the rest of the community."

"It's a net positive in terms of the consumer and the public is getting a massive improvement," he said. High-yield energy corporate debt continued to get hit hard this past week.

As for companies in the sector, they will feel the pinch from lower prices but other companies could as well, he said. Traders sought bargains in energy stocks this past week, pushing the S&P energy sector 9.2 percent higher.

Read MoreHoward Marks: Oil prices expose 'debt's weaknesses'

"There will be ripple effects into other industrial companies that have greater energy exposure than even the managements know," he said. "If we pulled back on rig activity globally then you'll have fewer helicopter rides, fewer aerospace parts for those helicopters. … The industrial companies are not necessarily aware of how big their energy exposure is."

Monday

1000 am Existing home sales

0100 pm $27 billion two-year note auction

Tuesday

0830 am Durable goods

0830 am Real GDP Q3 (third)

0900 am FHFA home price index

0955 am Consumer sentiment

1000 am Personal income

1000 am New home sales

0100 pm $35 billion 5-year note auction

Wednesday

0830 am Initial claims

1130 am $29 billion 7-year note auction

0100 pm Stock markets close

Thursday

Christmas Day holiday

Friday

U.S. markets reopen