The S&P 500 (INDEXSP:.INX) hit its highest level of all time just yesterday. The market is buoyant again after a taper talk soft period. Citigroup Inc (NYSE:C)  released its latest PULSE report on the state of the market today and took a look at equities over the next six months or so.

The report, which was authored by Citigroup Inc (NYSE:C) Chief U.S. Equity Strategist Tobias Levkovich, with contributions from Christina Wood and Lorraine Schmitt, concludes that the market is still cheap. According to the report, the analysis supports the prediction that the S&P 500 (INDEXSP:.INX) will hit somewhere in the region of 1,825 in the middle of next year.

Citgroup Pulse report

The PULSE report takes into account five different variables: ‘Price’, or stock valuation; ‘Unanticipated’, or macroeconomic shocks; ‘Liquidity’, or domestic outflows while money supply grew; ‘Sentiment’, or market expectations, and ‘Earnings’. Today’s report shows three of those indicators in the neutral zone, while ‘Price’ and ‘Earnings’ are sitting healthily in the positive area.

The Citigroup Inc (NYSE:C) analysis shows that market valuation is still below its 40-year weekly average by 1-2 standard deviations. Earnings season is seeing revisions to the upside, with six out of ten S&P 500 (INDEXSP:.INX) sectors revising earnings upward and 47.7 percent of revisions to the upside so far.

Earnings revisions upside

Earnings revisions have been positive so far, according to the Citigroup Inc (NYSE:C) report. The analysts think that the 47.7 percent of earnings revised upward is still a very positive sign for the market. In the September PULSE report, that figure stood at 49.5 percent.

S&P 500 revision

The graph above shows more than a decade of earnings revisions data against the movements of the S&P 500 (INDEXSP:.INX). Earnings revisions are highly volatile and highly related to each other, which makes them difficult measure, to use, and to predict behavior. Certain patterns can be gleaned from their movement, however.

S&P 500

S&P 500 sectors’ revisions

Earnings by sector showed that six of the ten sectors in the S&P 500 (INDEXSP:.INX) were seeing revisions to the upside. Financials and Health Care were two of the best performers in the sector, while Consumer Staples increased by a meaningful amount, in large part due to performance in the beverage sector.

For investors looking for advice on likely market moves, this report appears to support optimistic investment. There is still a “U” in PULSE, however, and the future of the market is by no means dictated by the performance of a few indicators.