This is the daily notebook from Mike Santoli, CNBC’s senior market commentator, with ideas on trends, stocks and market statistics. The fifth S&P 500 rally of more than 5% since the January 3 market peak is underway. The index is more than 8% higher than intraday-made for this downturn set a week ago. The previous four faltered and gave way to an additional slide to new lows. Does the current rebound seem more likely to hold up? The most recent jump came from a 20% decline level, although so far we have not closed below that threshold, giving this retreat a chance to become the fifth since 1990 to stop just below a 20% decline (1990, 1998, 2011, 2018 are the others). This story is now well known and the tactical algorithms are certainly mindful. It’s unclear if this is a relevant input or just a parlor game, but so far it sticks. We went into the week on a rare seven-week losing streak, so the average return was the bulls allies. Post-options expiration and monthly expiration factors are also net positive. Although the volumes are not large (they are almost never at rallies, by the way), the three-day progress is happening with very broad participation, 80% + upward volume since Wednesday. Pushing above last week’s high (around 4,090 on the S&P 500) is a modest plus. The move comes from the lowest valuations since the Covid crash, where the market absorbs some ambiguous retail and technology results, and investors have reached at least a temporary peace with the prospect of a tightening of the Federal Reserve. All for the better, but nothing here frees the market from either the nagging echoes of the Nasdaq Composite demolition in slow motion after 2000 or the feeling that the Fed is determined to clean up its financial situation if the markets loosen them too much to their liking. . . If the current level of the S & P 500 near 4,120 rings a bell, it may be because for a while it was the intraday low that traders had in mind for two whole months and that set the day Russia invaded Ukraine: 24 February. that this has been going on for almost five months at the big-cap index level (more than 15 months for speculative growth stocks) and that the market has simply gone back to levels that were once seen as a “must hold” on the downside. Consensus seems to be that this is a bear-market rally that is unlikely to lead much higher. This is both plausible and cautious, nor is it a bad thing for stocks that the reservoir of skepticism remains quite full. Yet – as asked here on Thursday – after months of dip buyers being run over and demoralized, could “rally sellers” perhaps have a tougher test of their convictions? More important to most than whether this is a pop to sell or chase is whether the correction has rebuilt the value in a way that has improved the risk / return agreement for long-term investors. Fair to call valuations – both absolute and relative to bond yields – as neutral rather than genuinely cheap, do not return above 17 times the year’s earnings after tied at 16.5. The pendulum often swings right through “fair value” in pressured markets, but sometimes it spends very little time on “cheap” readings. In early 2016, late 2018 and early 2020 divestments, the S&P 500 only spent weeks below 16 times forward earnings before rising higher. Yes, if we keep an eye on recession indefinitely and profit forecasts will be hacked lower, stocks may chase earnings lower, but it is not clear that there is a magic valuation zone we are certainly heading for. Is the mood / positioning still depressed enough to fuel a re-risking rally? Probably as measured by both surveys and the Bank of America’s bull and bear gauge, which is based on several market-based flow, positioning and credit indicators. Of course, this meter has remained low for a long time while the markets struggled, but in periods of non-crisis, low measurements have tended to isolate the markets from immediate, large and lasting further declines. Inflation figures for private consumption expenditure this morning were broadly as expected. With a third month-over-month core PCE in a row of 0.3% and the annual core figure now below 5%, this offers coverage for those willing to assume that the story of “peak inflation” has legs. Energy prices do not work with this view, but the ongoing shift to service spending on goods should help in the short term, as the labor market is cooling off with a slowdown in employment for large and small companies. We are going through an uneven earnings season. The forces of the end of the month should be spread around now. There are more than two weeks to the next Fed meeting, and it is unclear whether the upcoming job numbers will be a major market movement. The tape has been quite thin and illiquid, air pockets above and below. It will likely remain so when unofficial summer trading begins. As mentioned, the market width is again strong, 80% upward NYSE volume and more new highs than low. Credit continues to rise and risk spreads are retreating from the brink of more worrying levels. VIX is soft, both with higher index levels, more subdued intraday movements and the upcoming three-day weekend that suppresses expected volatility – making it safer to relax. We’ll have to see next week if that’s the case.