Stocks have fluctuated since the presidential election, with investors reacting to each headline from the budget talks. Stocks rallied Monday amid renewed signs of progress in the budget talks as President Obama and Speaker John Boehner met for talks on averting the "fiscal cliff" with just two weeks left until year end.
On Friday, Boehner offered to accept a tax rate increase for America's richest, viewed as a key Republican road block to striking a deal. While Obama has yet to accept the offer, the news provided enough fuel to spark a rally Monday.
Monday's gains follow last week's pullback on worries that talks were at a standstill.
"It's a very difficult market and we're at a juncture where we could be up or down 5 to 10 percent," said Hogan.
Because of the ongoing market volatility, some strategists have dubbed the recent trading environment as a "trader's market." Indeed, U.S.-based stock funds suffered the most outflows in nearly four months in November as many investors chose to sit on the sidelines amid the uncertainty in recent weeks.
"Our bet is that politicians will allow us to go over the cliff and then drag us out before we drown…once the talks get dragged into January, the pressure to come up with a resolution ticks up enormously," said Bruce McCain, chief investment strategist at Key Private Bank.
While McCain expects continued volatility through the beginning of next month, he said investors should use the dips to build on sectors that are more leveraged to overseas growth.
"Industrials, basic materials, and less so things like consumer staples and utilities—the easing of monetary policy across most economies suggest that growth will strengthen somewhat from where we are right now."
On the economic front Tuesday, the Commerce Department reports current account trade deficit for the third quarter and the National Association for Business Economics is scheduled to release its latest housing market index. In addition, the Treasury is slated to auction $35 billion in 5-year notes. (Read More: Really?! US Economy Set for Great Year in 2013)
"Fiscal cliff talks will supersede any housing number," said Joe Saluzzi, co-manager of trading at Themis Trading. "Volume will also thin toward the end of the week since the following week is a shortened-trading week—and as volume gets thinner, the market will move faster."
In addition, some notable companies are scheduled to report earnings throughout the week, including Oracle, FedEx, Nike and Research In Motion.
(Read More: CNBC's Market Insider Blog)
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
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