Rapid Fire Charts

(and an announcement)

Investors,

I am flying to Europe (Dubrovnik, Croatia) on Tuesday, so things have been hectic as I tie up loose ends in Philadelphia for my travels. I will be in Europe for the next three months, but I’ll continue to deliver the same quality and quantity of research on my trip. I’m essentially going full-on digital nomad! With time being of the essence, today’s edition of Cubic Analytics will be a compilation of the most important Twitter posts that I made during the week, pertaining to the economy, the stock market, and Bitcoin. In addition, my new deep-dive was published on Wednesday, March 1st, focusing specifically on Facebook/Meta META 0.00%↑.

I was blown away by the findings of the report, which only reaffirmed my initial thesis in the company. I even bought more of the stock in my long-term portfolio on Thursday, the first time I’ve bought shares since Q3 2022. For a full breakdown of the qualitative and quantitative investment thesis, where I fully review the company’s financials, please refer to the post below:

The Cash Flow Monster

Meta stock jumped +6.4% on Friday’s session, currently up +54% YTD. The report above highlights exactly why I think the stock is underpriced based on key fundamentals and why I’m interesting in buying it at this moment. To be clear, I plan to continue purchasing shares in the months ahead, regardless of market conditions.

In each of the Twitter posts below, feel free to click on the icon to open & view the post on Twitter for higher quality photos! Please comment and tell me if you like this new format, which seems more concise than my typical free editions. I’m happy to do more publications in this manner going forward, if it’s well-received :)

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Macroeconomics:

1. Interest expense is skyrocketing: There’s been a tremendous amount of focus on the U.S. federal government interest expense lately, which has been rising at a vertical pace. I dove into this topic and provided fresh context on this important data point to take things one step further:

Caleb Franzen @CalebFranzen

If you've been active on Twitter lately, I'm sure you've seen this chart of federal interest expense. It's going vertical, which really shouldn't be a surprise. In Q4 2022, federal interest payments were $852.6Bn. But let's take this a step further...

2. Inflation expectations are resurgent: Amidst hotter than expected inflation in January data, breakeven inflation rates are climbing back higher. There’s a tight correlation between the breakeven inflation rate and crude oil prices; however, the resurgence in inflation expectations is occurring while crude oil remain muted! If crude oil starts to accelerate higher, it could indicate that inflation expectations are going to increase even more.

Caleb Franzen @CalebFranzen

Interesting to see this divergence taking place: 🔵 5-year breakeven inflation rate #T5YIE 🔴 Crude oil #USOIL Inflation expectations rocketing higher despite oil prices staying muted. If/when oil prices accelerate higher, inflation expectations will also accelerate...

3. Treasury yields are climbing higher, substantially: Amidst resilient economic data & hotter than expected inflation, the market is actively getting repriced based on the “higher for longer” narrative. The 6-month Treasury yield hit new multi-year highs this week. On Wednesday, I posted the following to highlight why the 6M Treasury yield is so important right now (and will be going forward).

Caleb Franzen @CalebFranzen

The 6-month Treasury yield is rising to 5.164% today, the highest level since Jan.'07! Notice how it kept rising in Q4 2022 and January 2023, while 2, 5, 10, and 30-year Treasury yields were falling? This is why I'll keep saying that the 3M & 6M yields are the arbiters of truth.

4. February ISM data paints a rosy picture: The U.S. economy seems to have performed quite well in February, after strong & resilient data in January also. This new data reaffirms that the possibility of a soft-landing is actually trending towards being probable. Hey, maybe even a “no-landing” is possible, where the economy completely avoids a recession entirely…

Caleb Franzen @CalebFranzen

Services better than expected Lower prices paid Stronger employment Stronger new orders The U.S. economy 🔥🔥🔥

LiveSquawk @LiveSquawk

US ISM Services Index Feb: 55.1 (est 54.5; prev 55.2) - Prices Paid: 65.6 (prev 67.8) - Employment: 54.0 (prev 50.0) - New Orders: 62.6 (prev 60.4)

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1. The S&P 500 rebounds on key support structure: In early-February, I shared the following with investors:

Caleb Franzen @CalebFranzen

I've been warning about $4,080 for the S&P 500 $SPX because that was the highest daily close during the December rally. It's the teal zone on my chart below. If price falls below that range, possibly today, expect a full retest of the 200-day moving average cloud.

I was keenly focused on the 200-day moving averages, which also aligned perfectly with the upper-bound of the descending channel from 2022. Sure enough, that’s exactly where we fell last week & this week. I continued to foreshadow that this range had a high probability of support, which was confirmed by Friday’s price action. On Friday, the S&P 500 gained +1.6% after Thursday’s +0.7%.

It doesn’t get much cleaner than that folks! This appears to be a great sign or the bulls!

2. An exclusive & original study flashes a bullish signal: I’d strongly encourage you to read the entire thread starting with the post below, as this is one of the most important signals occurring in the market. In fact, the signal has an excellent track record, though it’s not perfect, and has only flashed 4 times in the past 10 years. Each of the prior three signals produced very bullish results.

Caleb Franzen @CalebFranzen

The S&P 500 is flashing one of my favorite bullish signals, for the first time since November 2020. In fact, this signal has only occurred 4x in the past 10 years! Here's the signal and why it's important:

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Bitcoin:

1. Bearish RSI divergence foreshadowed a terrible week: On 2/28, I shared the following, which encouraged investors to stay objective and to understand risks associated with Bitcoin based on this important statistical indicator. At the time, BTC was trading at $23,200. Right now (6pm ET, Friday evening), it’s trading at $22,300.

Caleb Franzen @CalebFranzen

We have to stay objective here, fam! In November 2022 & early January 2023, I highlighted that #Bitcoin was forming a bullish RSI divergence. Today, it's forming a bearish RSI divergence. Let's see how this plays out. Stay flexible and recognize the risks, and you'll survive.

2. On-chain data is still bullish: I’ve been keenly focused on the short-term holder realized price as the major piece of on-chain data I’m using in my analysis. So long as we remain above STHRP, I think odds are still in favor of the bulls.

Caleb Franzen @CalebFranzen

#Bitcoin is still trading above the short-term holder realized price, which has a positive slope & is currently valued at $19.9k. This is the primary on-chain datapoint that I'm using as my line in the sand for #BTC Price > STHRP = bullish Price < STHRP = bearish

To track this on-chain datapoint yourself, I use the following resource here.

Best,

Caleb Franzen

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DISCLAIMER:

This report expresses the views of the author as of the date it was published, and are subject to change without notice. The investment thesis, security analysis, risk appetite, and time frames expressed above are strictly those of the author and are not intended to be interpreted as financial advice. As such, market views covered in this publication are not to be considered investment advice and should be regarded as information only. Everyone is responsible to conduct their own due diligence, understand the risks associated with any information that is reviewed, and to recognize that the information contained herein does not constitute and should be construed as a solicitation of advisory services. Cubic Analytics believes that the information & sources from which information is being taken are accurate, but cannot guarantee the accuracy of such information.

This report may not be copied, reproduced, republished or posted without the consent of Cubic Analytics and/or Caleb Franzen, without proper citation & reference.

As always, consult a registered financial advisor and/or certified financial planner before making any investment decisions.