Investing.com – The December 2024 close fell 2.5%, missing the usual Santa Claus year-end rally.
Historically, this seven-day period between late December and early January is bullish 79% of the time, with an average return of 1.6%. But this year, the index fell 0.53%, indicating a riskier start to 2025.
Without a Santa rally, January becomes a potential weak point. BofA noted that in years without this rebound, January has a 52% chance of being negative, with an average drop of 0.29%. A down January could trigger a bearish “January barometer,” which often predicts a tough year for stocks.
Key technical levels are now in focus. The SPX is testing support near the 2024 presidential election gap at 5864-5783. A breakout could form a bearish head and shoulders pattern, exposing support at 5700-5650. However, breaking the resistance at 6017-6050 could nullify the bearish outlook.
The lackluster start to 2025 adds uncertainty to the first half. Historically, without a Santa Claus rally, the S&P 500 posts weaker first-quarter returns, with an average loss of 0.69%. The first half fares slightly better, up 57% of the time, but with negligible returns.
The market's trajectory in January will set the tone for a volatile year, especially as 2025 begins the presidential cycle, which traditionally brings mixed results.
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