This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. -A sudden tension-release rally as a benign inflation report collides with a market wound tight against further adverse surprises, driving a burst of short-covering and a grab for equity exposure and takes the S&P 500 directly to its next noteworthy test. -The outsized collapse in Treasury yields (the 2-year down a whopping 0.3 percentage points to a two-week low) and the US Dollar Index (a rare 2% plus daily drop taking it just about back to levels seen in mid-July ) speak to the spring-loaded anxiety about the chance for yet another hotter-than-hoped CPI print. -The cooler-than-forecast result quickly had the market lifting the probability of a downshift in the Fed’s tightening pace to allow the lagged impact of eight months of rate hikes to take hold. And with yesterday’s Atlanta Fed GDP Now update for Q4 hitting a 4% annual rate, it meant the odds of a soft economic landing perhaps looking a bit less remote. -The immediate impact is a rally in the S&P 500 more than twice the magnitude of yesterday’s 2% drop, with the index hustling back above 3900, around the pre-FOMC-meeting intraday highs, toward the middle of the seven-month range and exceeding the 100-day moving average. Upside to the 200-day (up another 4% or so from here) would mean a test of whether this is yet another strong but ultimately fleeting bear-market rally or the early leg of a more lasting recovery. -As noted a big short-covering component to today’s pop, as is typical of a market relaxing off a stressed condition (crypto crash, earnings blowups, etc). Still, the S&P is merely up less than 1% for November, so it remains whippy within a range. -Yet it’s also worth noting, as I have been for weeks, that the market had already been fairly resilient and discerning in failing to break down on the multiple Big Tech earnings flops, the hawkish Fedspeak yesterday and election noise. The well-understood but still-relevant traditional seasonal strength could explain part of this, traders not wanting to get too negative post midterm election. -Many now noting that the market’s perfect record of gains following a midterm election since 1950 has much to do with the fact that the economy has literally never been in a recession in the post-midterm year. So, yes, the central swing factor for the coming months and years is whether we tip into recession, whether it has the usual effect on corporate earnings (of if higher inflation/nominal GDP growth can buffer profit declines) and whether the Fed has already or is about to go too far. -Sentiment is certainly cautious enough to allow for more of a relief trade from here, AAII retail bears again far exceeding bulls (47% to 25%) and Tuesday showing one of the most extreme high equity put/call ratios in a long time. -Market-based inflation expectations back in a pretty acceptable zone under 2.5%, implies the Fed will get it done, whether the easy way or hard. -The crypto tumult is far from sorted out but the risk rally today taking some pressure off. Whether FTX is saved or fails and whether confidence is shot in the asset class is not yet known. Big picture, though, if the thing that “breaks” during this Fed tightening cycle and valuation reckoning is mainly crypto, that’s a fairly palatable impact for the overall system. -Market breadth quite strong, we’ll see if the elements of a significant “breadth thrust” start to fall into place, too early to tell. -VIX down almost 3 under 24, ratifying the lift in indexes and expressing relief at having the big known catalysts (election, CPI) past for now.