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This is what could decide when the Dow hits 20,000

Stocks could take their cue from oil Wednesday as the Dow continues to edge toward 20,000.

The Dow came within 13 points of the big round milestone Tuesday, but just a short hop away at 19,974, up 91 points and a new record. The S&P 500 was up 8 at 2,270, within reach of its all-time high of 2,277.

"We started out the week trying to figure out if the market would hold higher, to have Santa take it to 20,000. The small caps held higher. The techs that broke out last week retested the breakout level. The banks, which everyone says are overbought, haven't pulled in, and oil broke $51/$52, retested it and held," said Scott Redler, partner with T3live.com.

Oil was up just $0.11 per barrel to $52.23 in NYMEX trading, but West Texas Intermediate futures for February popped in late trading to above $53.50 per barrel. The American Petroleum Institute's crude supplies declined by 4.2 million barrels, while analysts expect decline of 2.4 million barrels. The Energy Information Administration reports the government's inventory data at 10:30 a.m. ET Wednesday.

"Oil might be the sector that brings the Dow over 20,000," said Redler. "It was a broad-based rally that got us over 19,000. It's been a lot of rotation and the same stuff that got us up to 20,000."

Redler said the market has been following technicals faithfully since the election. He said the tone looks good, but he has some concern about the potential for geopolitical risks after the truck attack in Berlin, where a driver ran into a crowd at a Christmas fair on Monday.

"The postelection move has been very technical. The market would break above barriers or records, extend and then pullback and the retest would hold. This has been healthy, as those who missed the first, second or third move had some time to position on the slight pullbacks," he said.

Redler said a move to 2,300 in the S&P 500 could encourage end-of-year follow-through and nudge the Dow toward 20,250.

Strategists have been focused on the fact the market has evolved from being highly correlated to where stock moves are extremely dispersed. In theory, that should have been a positive for stock pickers and could continue to be.

Chris Verrone of Strategas Research Partners pointed out that more stocks are moving independently of the S&P 500 benchmark than at any time in the last decade.

"The temptation is to say that correlation correlates inversely to equity market direction, and I will say in down markets, correlation tends to rise," said Julian Emanuel, equity and derivatives strategist at UBS. "But just because dispersion in the market is as great as it is right now, doesn't imminently say we're due for a pause. In our view, what argues for a potential pause in the market is the fact that we're trading 19.2 times 2016 earnings and consensus expects 2017 earnings to grow by 12.4 percent, so there is a very hopeful case priced into the equities market right now."

Emanuel does not expect a big pullback. "The difference between this year and last year is that people are much more comfortable owning stocks with prospects of higher growth out there this year than they were last year," he said. He said the Fed rate hike in December, 2015 was also ill-timed because of the weak readings on the economy in January 2016.

"You're going to see a continued rotation but towards the laggards. You see a lot of them in tech and health care and some of those have lagged since the election in particular," he said. "It's probably a less discrete rotation away from the winners and more of a distinct rotation into the laggards."

For Wednesday, there are existing home sales for November reported at 10 a.m. There are also a few earnings reports including Accenture, Actuant, Winnebago and Paychex before the bell. Micron, Bed Bath & Beyond and Red Hat report after the close.