This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. It’s a benign, quiet consolidation at the crossroads. The S & P 500 hovers at the downtrend line everyone’s watching after back-to-back 1%+ gains. Not conclusive, but constructive. The market sits in the opposing currents of two quite different, yet plausible, outcomes: the inexorable decline into a painful downturn and earnings descent from one side and soft-ish landing with healthy nominal growth and an economy acclimating to higher rates and a shift toward services from goods consumption on the other. The S & P 500 popping above the famous trend line would be a positive but in itself not a game changer. A run above 4,100 would surmount the early-December high and would start the process of curling the 200-day average higher. From 4,100 on, a routine 7%-8% retracement would still just take the index to the lower end of a higher range above 3,800. Structurally and psychologically, this would help. Breadth indicators remain among the most bullish clues lately, though perhaps this is swayed by a stronger-than-usual January dynamic of washed-out stocks getting a bid. Bank of America tracks cumulative breadth in the 15 most active stocks, just broke out, for what it’s worth. For many months, the “keep it simple” bear case has been “stocks are in a downtrend and the Fed is tightening into a slowdown.” That setup has the potential to change, with the Federal Reserve slowing toward a pause, GDP perky to end 2022 and — maybe — the benchmark index on the verge of breaking the pattern of “lower highs and lower lows.” The macro debate is increasingly about the predictive power of certain leading indicators (ISM surveys, regional-Fed surveys, consumer expectations, the Treasury yield curve, NAHB sentiment). None can be dismissed but they largely fall into the category of “soft” data that gauge perceptions and rate-of-change. Good for clocking the changing pace of the economy, but after a pandemic consumption binge and supply-chain-snagged double-ordering phase, the interplay with total employment, incomes and spending aren’t set in stone. Goldman Sachs notes the recent divergence in hard vs. soft data today. For sure, this can simply be about the lags in policy tightening which will make their way into the hard data, but arguably the peak impact of financial-condition tightening on housing is past and the question now is how much Corporate America retrenches. Microsoft earnings seem crucial from an index-influence perspective (MSFT is more than 5%), but the company has managed expectations pretty carefully. Calendar-2023 earnings estimates are down more than 11% since mid-2022, and the company tends not to shock too dramatically. Not clear to me MSFT is a great bellwether for the rest of the industry, except perhaps the PC food chain. The general run of earnings reports continues to be fairly downbeat. Not many outright jolts from large-cap companies but some sloppy results and muted guidance so far. This will keep scrutiny on overall valuations. S & P 500 as a whole at 17x next 12 months’ consensus — not cheap. Slicing away the five largest S & P 500 names or using the equal-weight S & P renders the P/E nearer to 15x. That’s neither a demanding nor a compelling valuation bogey at this point. Worth recalling the S & P had a 25%+ drawdown last year when earnings were still hitting record highs in aggregate, so softness in Q4 not entirely a shock to the tape. Breadth today is blah, about 50-50. VIX is snoozing below 20, befitting the flattish tone ahead of PCE inflation report Friday and Fed decision next week.