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Trump trade could hitch a ride with Santa rally

Stocks could take another leg higher into year end, after the four major market indexes all closed at record highs — a bullish sign.

"Anytime you get confirmation with all four indices getting record closes, that usually leads to additional buying," said Paul LaRosa, chief technician at Maxim Group.

The S&P 500 was the last index to break out to a new high, rising 0.8 percent Monday to close at 2198. The Russell 2000 continued its rally, rising for a 12th day, with a half percent to 1,322. The Nasdaq, helped by a jump in tech, rose 0.9 percent to 5368, and the Dow edged close to 19,000 — gaining a half percent to 18,956.

Energy stocks led the gains, rising 2 percent. Crude oil jumped about 4 percent on optimism that OPEC and other producers would come to an agreement on production. West Texas Intermediate futures rose to $47.48 per barrel.

"20,000 would be the target" on the Dow, LaRosa said. That target is not necessarily for this year. "It just seems like money is flowing into this market. People are repositioning. People are encouraged that more investment will come into the United States. Money will come from overseas. Regulation will be lifted. Right now, the light is green," he said.

The last time the Dow, Nasdaq and S&P all closed at record highs was August 15. After that, the market traded sideways for about a month, until a slight pullback Sept. 9, then another pullback at the end of October into the election. Donald Trump's surprise victory resulted in a quick knee-jerk sell-off in the overnight futures market, but then the market reversed and the S&P 500 has risen 2.7 percent since the election.

Trump has promised a big infrastructure spending program and tax cuts for corporations and individuals. "It's really hard to look at a sector and say it's not going to have the wind at its back if we get growth to get up over 3 percent," said LaRosa.

Don Townswick, director of equities at Conning, said he agrees that 20,000 could be next up for the Dow.

"There will be some ups and downs, but I think the trend is upward," he said. "These valuations were justified even with anemic growth. If growth improves and we're going to see a double whammy, multiple expansion and earnings growth, we could be at the beginning of something very strong" if growth-oriented policies are put in place, he said.

Townswick said he knows a number of bears that have been forced to move into the market now, but he also said the year-end trade, usually positive for stocks, could also help the market. "I do think there's a seasonal aspect to it. At the end of the day, the election is over. The candidate nobody wanted got elected, and the world didn't end yet," said Townswick.

The typical Santa rally takes place in late December, but the market does have a good track record of making gains at this time of year.

"Thanksgiving week tends to trend higher. Today could set the tone for the rest of the week, barring any kind of incident. I would think it continues. As far as seasonality, it will play a big role. Then into Christmas performance chasing could start to happen as well. Besides the solid technical landscape, there are still a lot of fund managers under-invested and a lot of retail investors not in the market," said Scott Redler, partner with T3Live.com

Stocks are more often positive from November to April. "I think the measured move is 2,240" on the S&P, Redler said.

Treasury yields were lower Monday, with the 10-year at 2.31 percent. There is a $34 billion five-year auction Tuesday, which is being watched after Monday's two-year note auction was on the weaker side. Dealers took more of the supply than usual and the auction went at a yield of 1.085, the highest since 2009.

Earnings are expected Tuesday morning from Campbell Soup, Hormel Foods, Seadrill Ltd., Signet Jewelers, Medtronic, Analog Devices, Cracker Barrel, Chico's FAS, Jacobs Engineering and Barnes and Noble. Hewlett Packard Enterprises, HP, Urban Outfitters, GameStop and Mentor Graphics report after the closing bell.

There are existing home sales at 10 a.m. ET.