This is the daily notebook of Mike Santoli, CNBC’s senior market commentator, with ideas on trends, stocks and market statistics. This is a quiet and calm consolidation at the crossroads. The S&P 500 is hovering in the downtrend line that everyone is watching after pulling back 1%+ gains. Not conclusive, but constructive. The market sits in the opposing currents of two different but possible outcomes: an inevitable decline into a tight recession and incomes from one side and a soft landing with healthy nominal growth and an economy that adapts to higher rates and change in direction. services from the consumption of goods in other. The S&P 500 emerging above a prominent trend line would be positive but not a game changer. A run above 4,100 will surpass the highs of early December and will begin the process of rolling the 200-day moving average higher. From 4,100, a routine 7%-8% retracement would still bring the index to the lower end of the higher range above 3,800. Structurally and psychologically, this will help. The depth indicator remains among the most bullish indicators of late, although it may have been influenced by the stronger-than-usual January dynamics in which stocks have been dumped. Bank of America tracks the cumulative breadth in the 15 most active stocks, just recently, for what it’s worth. For months, the bear case of “keeping it simple” has been “stocks are in a downtrend and the Fed has been tightening slowly.” The setup has the potential for change, with the Federal Reserve slowing to a pause, perky GDP to end 2022 and – possibly – the benchmark index on the verge of breaking the pattern “higher lower and lower lower.” The macro debate is growing on the predictive power of certain key indicators (ISM survey, regional-Fed survey, consumer expectations, Treasury yield curve, NAHB sentiment). There’s no denying it, but most of it falls into the category of “soft” data that measures perceptions and rates of change. It is good to accelerate economic change, but after the consumption of the pandemic binge and the second order phase of the supply chain, the interaction with total employment, income, and spending is not set in stone. Goldman Sachs noted a new distinction in hard data vs. Of course, this can only be about lags policy tightening which will make the way to hard data, but arguably the peak impact of tightening financial-situation at home is in the past and the question now is how much Corporate America retrenches. Microsoft’s earnings look important from an index impact perspective (MSFT is over 5%), but the company has carefully managed expectations. Calendar-2023 revenue estimates are down more than 11% from mid-2022, and the company isn’t too surprised. It is not clear to me that MSFT is a big bellwether for the rest of the industry, except perhaps the PC food chain. Earnings reports generally remain slightly down. Not many direct jolts from big-cap companies but some sloppy results and dumb guidance so far. This will keep the scrutiny on the overall valuation. S & P 500 as a whole at 17x the next 12 months’ consensus – not cheap. Slicing out the five largest S&P 500 names or using an equally weighted S&P brings the P/E closer to 15x. This is not a demanding or weak value bogey at this point. It’s worth noting that the S&P had a 25%+ drawdown last year while earnings were still hitting record numbers, so the softness in Q4 isn’t a surprise for the tape. Breadth today blah, about 50-50. The VIX lingered below 20, matching the flattish tone ahead of Saturday’s PCE inflation report and next week’s Fed decision.