Investing.com — The wide gap left in the 2024 election has emerged as a key level of support for the 2025 primary, according to a Bank of America strategist.

The S&P 500 (SPX) faces a challenging start to 2025 after a lackluster performance in December 2024. The absence of the traditional Santa Claus rally, which usually occurs in the last week of December and the first two days in January, raised concerns for the performance of the index in the first half of the year.

According to BofA technical strategist Stephen Suttmeier, the S&P 500 is currently testing a significant level of support arising from the upside gap created by the 2024 Presidential election, in the range from 5864 to 5783.

“If the SPX fills this gap, the risk is for a November to January head and shoulders (H&S) to expose greater support at 5700-5650,” Suttmeier said in a note on Monday. . “Until then, a break above the shoulder peaks from 6017 to 6050 should negate the H&S high and improve the tactical outlook for the SPX.”

SPX’s advance-decline (AD) line shows a weak trend since late November 2024, increasing the possibility of an H&S top. However, the overall net up volume remains stable, which may reduce the risk of H&S materialisation.

Historically, the S&P 500 has risen 79% during the Santa Claus rally season with an average return of 1.6%. The loss of this rally in the 2024-2025 transition, with the SPX falling 0.53%, poses a risk for January as well as the first quarter and half of 2025.

According to the BofA report, if the S&P 500 misses the usual Santa rally, the possibility of a weaker increase in January. Historically, in those cases, the index has declined 52% of the time, with an average return of -0.29%.

“January has many trading days left, but a fall in January will create a bearish signal in the January Barometer for 2025,” Suttmeier said.

In addition, when the index missed the Santa Claus rally, the first quarter and the first half of the year historically showed weak performance, with the SPX falling 57% during the first quarter and showing a lower average and median return in both the first quarter and first half of the year.

The January Barometer, which suggests that the S&P 500’s performance in January may reflect trends for the rest of the year, is especially important in the first year of the Presidential Cycle.

In such years, when January is positive, the SPX is up 79% of the time with an average return of 13.9% for the year.

Conversely, a negative January has historically led the index to fall 70% of the time with an average return of -3.5%.