Stocks have the wind at their back, with catalysts in place for more new highs.
The three major indices all closed at records Tuesday. The S&P 500 edged to a high of 2496, a short hop from 2500, which is a key psychological level that could bring in more buyers in the next couple of days.
"Buying begets more buying," said Quincy Krosby, Prudential Financial chief market strategist. "This is momentum. …Every time we break to another level, you break through and pull back, break through and pull back. We'll see if this can actually bring in more buyers."
Stocks surged Monday after Hurricane Irma ended up less severe than forecast on its weekend trek through Florida, and on relief that North Korea did not launch a test missile Saturday, as expected.
The rally got another boost Tuesday when Treasury Secretary Steven Mnuchin discussed the Trump administration's goal of achieving tax reform, and possibly making it effective this year. Mnuchin was interviewed at the Delivering Alpha conference, a CNBC and Institutional Investor production.
"Overall, the market absorbed some pretty complicated headlines in the last few weeks. Unless we get some different headlines, the path of least resistance is higher," said Scott Redler, partner with T3Live.com.
"Geopolitical threats still hang over the market, but it's been eclipsed by the idea that the president is pushing forth some sort of tax deal. That's was helpful to the market," said Krosby. "That said we'll see what the Fed has to say next week."
The Fed meets next Tuesday and Wednesday and is widely expected to begin the process of shrinking its $4.5 trillion balance sheet. But the Fed's comments and forecasts on the economy will also be watched closely, as that may provide clues about whether it still plans another interest rate hike later this year.
Paul LaRosa, chief market technician at Maxim Group, said he would like to see the Nasdaq return to its all-time intraday high of 6460, and the Dow reach its intraday high of 22,179 to confirm the moves higher. The Russell 2000 is still far away from its all-time high of 1452, after it ended the day at 1423, a gain of 0.6 percent.
"What it means is that this could mean no correction for the near term if they all confirm," he said. "But I don't feel like this is a broad-based rally. I've seen a lot of technical deterioration in the individual charts over the last several months. That's why I think the market is unpredictable and choppy. Unless I see a big improvement in the breadth of the market, I'm not expecting a broad-based rally to develop."
Analysts have been expecting a pull back during August or September, both historically weak months.
"We've been too strong for too long. It could happen. Depending on how that develops, it could be an opportunity to put more money to work. I wouldn't expect more than a three to five percent correction," LaRosa said. Yet LaRosa said a lot of money comes into the market after Labor Day so there may be momentum to move higher before stocks confront another hurdle — earnings season in October.
"I wouldn't be surprised if we had weakness toward the end of the month. A lot of money has been put to work. The market has hit new highs. Now what's going to drive it higher? Earnings season will be coming up in October. That' s one possible launching pad. The debt ceiling has been resolved. That's another reason we're [rallying] here," he said.
Technology will be an important sector to watch Wednesday, after Apple's big iPhone announcements Tuesday. Redler said he bought some Apple, which traded slightly lower, amid some disappointment that its iPhone X will not be available to order until October or for sale until November.
Apple has sold off on past iPhone announcement days, falling 75 percent of the time after 11 previous announcements. But on the next day, the stock rose 60 percent of the time, according to CNBC data research.
Redler said he is also watching Amazon stock for clues on tech. The stock closed at $982.50 Tuesday, and its 50-day moving average is around $986.
"Amazon's been below its 50-day. If Amazon can get to the 50-day with some authority, that would help the market psychology," said Redler, who follows the market's short-term technicals.
He said the S&P's next target would be 2540.
"At this point, I do think it's attainable. But you have a few sectors playing a little bit of catch up. The banks are back in line, and the XLE [Energy Select Sector SPDR ETF] is back above the 50-day," said Redler. When the S&P 500 rose above 2470 Monday, he said, that lured buyers back in.
While the market is awaiting consumer inflation data Thursday, but there is producer price index inflation at 8:30 a.m. ET Wednesday. At 10:30 a.m. ET, the U.S. Energy Information Administration releases oil and gasoline inventory data, which should give some insight into the impact of Hurricane Harvey on the refining sector.