Santa Claus shows up in Thursday's Thanksgiving Day parade, but it's not so clear whether he's going to visit Wall Street this year.
Gansovsky Vladislav | Vetta | Getty Images
Some analysts say stocks are hostage to "Fiscal Cliff" negotiations in Washington, and any rally now is temporary, until there is more clarity.
Yet, others say there could be a "Santa Claus rally" even if it gets off to a slow start.
"We've come through the worst seasonal time of the year for the equity market, and we are about to head into the best seasonal time for the equity market," said Jordan Kotick, global head of technical strategy at Barclays.
Kotick says, like a prize fighter, the market was knocked down but is beginning to stand up and could move higher in December and into January.
"I understand there's the fiscal cliff. I get it," he said. "That is known. It's news that is discounted. I think the market is pricing in compromise."
He said once the S&P breaks through the 1,420-1,430 area, it could be on track for a move up toward 1,500. (Read More: Who Gets Hurt the Most If US Goes Off 'Fiscal Cliff'?)
But others are less optimistic the market will move higher because of other issues, like softer economic data and earnings. And even if the fiscal cliff is avoided, growth could be very sluggish next year.
"I think people are going to be looking for an overall bias to the trend, but I don't think a meaningful breakout is in the cards. We are likely to have seen the highs for the year," said Sam Stovall, chief equity strategist at S&P Capital IQ.
The S&P 500's 2012 high of 1,465 was set as the Fed announced its latest easing program, QE3, in September
"Maybe we get a final spurt towards the end of the year, if something positive comes out of Washington," Stovall said. (Read More: Trading the 'Cliff'—CNBC's Model ETF Portfolios)
He said it's possible Congress pushes off resolving the impact of the so-called cliff until the new Congress is seated early next year.
The Congressional Budget Office has said the roughly $500 billion in expiring tax breaks and automatic spending cuts would then slam the economy, throwing it into a recession in the first half of 2013, if Congress fails to act by the end of the year.
"There are so many uncertainties," said Stovall. "Because things could go either way…we're going to be paying very close attention to technicals, the moving averages and such, and what that tells you."
Stocks struggled in the first few sessions after the election because of worries that President Barack Obama and the divided Congress would fail to make a deal, but the market was soothed by promises from Obama and Congressional leaders that there was a willingness to compromise.
This week, the S&P 500 is 2.3 percent higher at 1,391 so far, and the Dow is up 2 percent to 12,836, both moving higher while Congress was away for the holiday week. The stock market is closed Thursday, and reopens Friday for a shortened session.
"Congress is still adjourned. That doesn't change until Tuesday of next week," said Art Cashin, director of floor operations at UBS. "That reintroduces risk."
"Next week is a little more iffy for me than for other people. They're looking for a Santa Claus rally," Cashin said. He said Congress does pose a threat to the market, and it's not the Congressional leadership he is worried about.
"You're going to have 400 other people coming back to Washington, and they could be anywhere from tea party to left wing, and some of them may be unelected," he said. "If they start to get to where It looks like the leadership might not get the votes, the market will take notice."
Cashin said the Monday after Thanksgiving is "suspect." Seven of the past 10 post-Thanksgiving Mondays were down days for the Dow.
However, Jeff Hirsch, publisher of "Stock Trader Almanac" said there's a longer term trend that shows a Thanksgiving trade as positive, on the day before and the day after the holiday. He said that trade was hurt in the past few years by events, including by the Greek debt crisis last year.
"I would suspect with the shellacking we took last week, and the fact we are seeing some resolution of it, the historic bullish bias on the Wednesday before and the day after might represent itself this year," he said. Since 1988, the Wednesday to Friday Thanksgiving period gained 14 of 24 times. Prior to 1988, the trend was positive on those days 33 of 35 years.
Paul LaRosa, technical analyst at Maxim, said stocks could have a short term bounce but it should end soon. "I think we'll get another run—at 13,100 on the Dow and 1,410 on the S&P—and I think people should take some gains off the table," he said.
"There's a lot going on in the news, the fiscal cliff, things in Europe. I think Congress is in a tough spot, and they'll come up with some compromise and put off a major decision until next year. I don't know how investors will take that," he said.
Follow Patti Domm on Twitter: @pattidomm
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