Investing.com – December 2024 ended down 2.5%, missing the usual year-end Santa Claus rally.
Historically, this seven-day period from late December to early January is bullish 79% of the time, with an average return of 1.6%. But the index is down 0.53% this year, signaling a riskier start to 2025.
Without a Santa rally, January becomes a potential weak point. BofA noted that in years without this rally, the chance of January being negative is 52%, with an average decline of 0.29%. A fall in January could trigger a bearish January Barometer, which often predicts a tough year for stocks.
Key technical levels are now in the spotlight. 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, a break above the 6017-6050 resistance could negate the bearish outlook.
A lackluster start to 2025 adds uncertainty to the first half of the year. Historically, without a Santa rally, the S&P 500 has performed weaker in the first quarter, losing 0.69% on average. In the first half of the year things are a little better: an increase of 57% of cases, but with little return.
The market’s trajectory in January will set the tone for a volatile year, especially as 2025 begins the presidential cycle, which traditionally has mixed results.