Equity markets advanced on Tuesday in a day of light holiday week trading. The S&P 500 gained less than a percentage point but set a new two-year high and is on the way to retesting the all-time high soon. Equities will likely move higher this week in a Santa Claus Rally and could set a new all-time high before the New Year.

This week's action will be characterized by low volume. Traders and investors are taking a break, waiting to see what happens with the New Year, inflation and the Fed. There are no earnings reports and few economic releases, so politics and geopolitical tensions could drive a knee-jerk reaction should news develop. Oil is vulnerable to such a move; the price of WTI hit bottom with the FOMC pivot to a less hawkish stance and could be sent sharply higher, given a catalyst.