BTC is off over 7% this morning. It has spent the past two months in a flag pattern – a small channel which interrupts what in this case was a strong downtrend. It’s normally a continuation pattern, meaning that the downtrend is expected to continue following the interruption.

continued for members…

Note that BTC not only reached the top of this extended flag pattern, but it also tagged a TL connecting the last two highs. This TL was very nearly parallel to the one connecting the last two major lows, so it has the makings of a channel.

If we zoom out, we are reminded that BTC already broke down from a very significant price channel, a large Head & Shoulders Pattern, and a death cross (the SMA50 dropping below the SMA200.)

In delaying the next leg down via this flag pattern, it is repeating the same maneuver it made from Jan-May.That flag pattern kept BTC from continuing down the pink channel to its appointment with the bottom of the huge rising yellow channel and the blue .618 Fib retracement at 28,737. It got there eventually. It just took an extra 3 months.

Is BTC still headed for our H&S target of 15,277 or the .886 Fib at 11,277? Probably. But, the flag pattern will have to break down first. That means a convincing drop through 20,500ish.

Today’s equities picture is little changed from yesterday’s. The only difference is that VIX didn’t immediately crater after reaching the top of the falling wedge. This is a positive for bears, but far from a sure thing. VIX still has to break out of the channel itself.

If it can, then ES stands a very good chance of breaking down from its rising wedge/channel.

I’m on the road today, so won’t be able to keep an eye on markets. Have a great weekend everyone.