Oil could grease the skids for the Dow to reach 20,000.
The Dow inched closer but couldn't make it over the top on Tuesday, so traders now are holding out hope it can climb above the big milestone Wednesday. Stock futures were higher in Wednesday trading, as higher commodities prices lifted stocks globally.
"We're right there. It looks like we're a rounding error away," said Ari Wald, technical analyst at Oppenheimer. While the Dow gained 11 to close at 19,945, the Nasdaq jumped a half percent to 5,487, a new closing high.
Wald said it's a positive that the "Santa rally" period has been a time for gains so far, albeit slight. The rally period is the final five trading days of the old year and the first two of the new year.
"Since 1928, the S&P  has been higher in 68 out of 88 years," said Wald. For the 88-year period, the S&P has gained an average 1.7 percent in those seven trading days.
But following a positive Santa rally period, the S&P has gained on average 2.8 percent in the following three-month period.
"However, equally important is if the market is down during the seven-day period, it actually tends to bode unfavorably for forward performance," he said. Wald noted the S&P has averaged a 1.2 percent loss in the three months, following a decline in those seven trading days.
On tap for Wednesday, pending home sales are reported at 10 a.m. ET. The Treasury also auctions $34 billion five-year notes at 1 p.m.
Tuesday and was trading higher just below $54 per barrel Wednesday, at 2015 high. West Texas Intermediate futures for January closed at $53.90 Tuesday, the highest settle since July, 2015. The S&P energy sector, however, had muted gains and was up just 0.2 percent.
Oil does not need to move higher to help stocks, but traders say it can't be a drag so they've been watching it closely. Oil prices are up about 20 percent since the election, helped by OPEC's agreement to cut production. Rising oil has become a positive for the market, which was ripped by a sharp decline in crude prices earlier in the year.
The Dow touched a low of 15,450 back in February as oil bottomed, dropping below $30 per barrel. Wald said the rising dollar and higher oil prices are now positives for the stock market, with the dollar stronger but not rising too rapidly.
"It's strong but not too strong. That's your Goldilocks scenario," he said.
"The turn in the between the first quarter and now is truly amazing," he said.
The was up 5 points at 2,268 Tuesday, and Wald said the next place it could meet resistance is 2,277, its all-time high.
"There's no sign of a meaningful top in place. It's come with the right leadership, improving credit spreads, interest rates moving in the right direction. It's also the underlying factors that characterizes a continuation of a trend rather than a reversal," said Wald.
He expects the S&P 500 to reach 2,500 by the end of next year.