The Chart du Jour

European Vibes

March 25, 2000

Two interesting events started to eminate from Europe last week.

First, while American shares continued to party -- at least until Friday afternoon -- the European Internet cousins to our Silicon Valley collapsed, sending the Bloomberg European Internet Index down some 11%. This now leaves this index down a total of 33% since March 10, a non-trivial reversal of previous year-to-date gains. The culprit appears to be a whole host of further equity share issuance and the sudden realization that ISP competition will soon become ever-more fierce.

And while European Internets fizzled, we also got a breakout of sorts in a long-dormant Euro-Swiss Franc cross when the Swiss National Bank unexpectedly increased interest rates by 75 basis points. Now there's a central bank that doesn't pussy-foot around. The daily and weekly charts of Euro-Swiss are pictured below, but to get a true perspective on this cross we must go back to a longer-term monthly view. We do so using a chart of Deutsche Mark-Swiss Franc, the Euro-Swiss forbearer.

Chart produced using Advanced GET End-of-Day

We are not entirely sure on a Fibonacci rhythm basis how low this cross is headed, but if the depicted trendline on the DM-CHF long term chart breaks, significantly lower we should go! The overall complexion of this chart does not at the current time look like a sucessful bottoming formation. Instead, we are likely to spike down into a more isolated low. One can hear the air starting to hiss out of many a short CHF carry trade already.

Meanwhile, over on the cash S&P chart, is that a bearish "evening star" candlestick formation that we spy?

Chart produced using Advanced GET End-of-Day

Dangerous, dangerous times -- but so few seem to realize this yet.

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