Santoli: stocks fluctuate near key thresholds as the market hints at a change in character

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. The tape remains sloppy and tentative, but

it's trying to hold together at significant levels. It's churning near the low end of a three-month range following a tepid early bounce attempt. So far it's refusing to break

down decisively. The S & P 500 touched an intraday high of 4,545 on Sept. 2. At today's low it was within a half-percent of that level and slightly under its 100-day average, an

area that slowed and then halted the pullbacks of last fall and in December. This is also the down-5% threshold, which has been about the max setback since Election Day 2020. There's

nothing inherently dangerous about a months-long period of frustrating consolidation, of course. One could even argue that the indexes chopping around within 5% of record highs is a

respectable outcome considering the following: 2022 rate-hike expectations go from "maybe 1-2" to "probably four," the sectors riding highest on investor adrenaline have

been trounced and omicron knocks the economy into another travel-and-shopping soft patch. For sure, it could well be a net positive, even as the market shows some hints of a change in

character. We've now had three 1% daily losses in the S & P this month with no 1% gains. Last year saw 21 1% daily losses, and there was a 1% gain within three days following 19 of

those, according to Instinet. The Nasdaq 100 relative to the broad Russell 1000 is struggling, as the Nasdaq Composite touched the minus-10% level, but nothing says it can't get some

traction and quit being a drag. The NDX went from 22x forward earnings up to 31x and is now near 27x. Hard to say where the equilibrium is, but some of the mean-reversion work has occurred.

Banks giving back about a third of their hefty gains from the first two weeks of the year. There's some sell-the-news effect on earnings, some seizing on the excuse of higher cost

trends and some simple cooling off after value-over-growth ran pretty hot. Software, cloud, fintech and ARKK trying to bounce. This is the puffed-up stuff that led the way lower. Bounces are

inherently suspect for a while in these areas, but worth watching for possible "sold out" readings. The Fed-behind-the-curve narrative has really galloped far ahead of the

probable path of policy. Treasury yields on the short end relaxing slightly. The broad market's caution is understandable, given the wide range of possible trajectories on growth,

inflation, Fed action, potential mistakes (or imagined mistakes), labor participation and deployment of built-up savings. Probably means in the very short term there's a chance for a

bit of relief on anything less than bloodthirsty hawkishness from Powell next week. And we're starting from loosest-ever liquidity conditions, which means lots of slack to take up

before the choke-chain on the markets is pulled taut. Market breadth evenly mixed, equal-weigh S & P slightly outperforming this month and nearer to its record high. Credit spreads

remain reassuringly snug. VIX is snoozing in the 22s with flattish indexes and earnings movers going separate ways underneath.