The Coronavirus Impact on the Markets and Why Things aren’t Quite as You Would Expect

By Mark Shawzin03/04/2020

This week’s report will be a little bit different. I’ve taken an extract from a recent Master Pattern Trader session and provided it for you here.

I think you’ll get a lot out of it, because it addresses the key strategies I use to consistently make money as a trader.

Let’s start by talking about outlier events, with the obvious example being the coronavirus that’s dominating the news headlines right now.

People have asked me how I trade outlier events that (apparently) drive the markets. People ask how I can predict events and profit from them. It must be really hard, right?

In my opinion, trying to predict movements is no more challenging than in the past. My philosophy is that patterns indicate what’s going to happen in the future irrespective of events. And this past week has been an outstanding example of that.

Let me show you an email I sent to members on February 16 discussing USDJPY (the U.S. dollar against the Japanese yen) as USDJPY was at the 111 – 112 area.

I didn’t believe in the recent uptrend in USDJPY and thought the recent rise was nothing more than a false move. That’s because the bearish governing patterns hadn’t yet been busted.

Note that two weeks ago, there was no panic over the coronavirus. All the coronavirus hysteria started last week. I just observed USDJPY patterns and the price action and reported on what they told me, which was that I felt USDJPY would drop. I was willing to throw in the towel if USDJPY went over 113 but not until then.

In that email, I also discussed GBPAUD and GBPNZD (the British pound against the Australian dollar and New Zealand dollar) and that they remained in consolidation mode before the next major move up.

Despite a lot of volatility in those pairs, I wasn’t abandoning my bullish stance. I thought it was just a matter of time before they broke out to multi-year highs due to the strength of their bullish patterns.

I finished with XAGUSD (spot silver) where my main point was that the tepid price action of silver made my very reluctant to jump aboard the long side.

Silver was still in a long-term bear market despite all the emotional excitement over it in recent months.

That’s why I had my doubts about the staying power of XAUUSD (spot gold). I thought silver was likely to act as a drag on it despite the much stronger bullish patterns for the yellow metal.

I’m pointing this out to make the point that I don’t react to events.

I react to price patterns and price action, not events.

And please note that I wrote all the above views BEFORE the coronavirus panic set in and proved my forward-looking views to be correct.

I really want to emphasize that events tend to be catalysts for where the price action is going to go anyway. The pattens bake the future price action into the cake, so to speak.

So with all that backstory in place, let’s look at how the various instruments (USDJPY, GBPAUD/GBPNZD, XAGUSD, XAUUSD) did.

We’ll start with XAGUSD (spot silver).

When you examine any market, you must first determine its overall condition or trend. Are we seeing a bull market or a bear market? Until proven otherwise, you stay with the main trend.

Now of course, bull markets and bear markets end eventually. However, traders often call the turn prematurely. They fail to note that when markets change, there’s always a pattern that proceeds that change. Plus there’s price action afterward that must support that pattern.

Otherwise that bull or bear market hasn’t actually ended. If you jump in too quickly, you’re going to be trading the wrong way against the trend.

Just seeing the pattern isn’t enough. When I used to spot a double bottom or a double top, I often thought that pattern was “enough”. That was in my younger days, though.

Over the years I’ve learned (and taught my Master Pattern Trader members) that you need confirmation after a particular bottoming/topping pattern occurs. That’s how you know it’s the real deal and be truly confident.

Here’s what I mean:

If a double bottom really is a double bottom, you need some additional feedback in the form of higher highs. You can’t have a bull market with lower highs, can you?

With silver, you can see that it had several bounces off a common low at $14. Several of those bounces have looked pretty exciting at times. Search the Internet and you’ll see plenty of hysteria about the new silver bull and how you’ve got to buy silver now before you miss out.

Yet there really isn’t a silver bull market yet. These bounces are nothing more than dead cat bounces in a long-running bear market.

Why? Note that there are no higher highs despite all these “positive” bounces. How can there be a bull market when the market has failed to rally beyond previous highs?

That’s how you can separate the real patterns from the ‘not so real’ patterns: does subsequent price action reinforce the pattern that’s just formed?

If the answer is yes, then it’s a real pattern. Otherwise, no.

We all know that lower lows are a distinguishing factor of a bear market. A bear market ends only when the price makes higher highs.

Silver hasn’t done that. It’s why I’ve been saying despite that despite silver’s apparent double bottom, I’m not convinced it really is a double bottom until silver can take out $19.65 and $21.15. I said that several emails and several weeks ago too!

I’m pretty proud of not being duped by the recent silver rally. You see, trading is a function of not only spotting the opportunities but also the pitfalls and traps the market lays for you. Silver’s rally was certainly one of the latter.

In fact, if you dig into silver’s price action, you can see key reversals where the market made new highs and then closed on the low of the week. Those are bearish signs and they capped each attempted rally.

So there’s no bull market in silver … yet. At best, silver will go sideways despite this worldwide pandemic (and associated hysteria) right now.

Now here’s the thing: I guarantee that if you were watching Bloomberg or any other business channel where they’re talking about the coronavirus nonstop, there’s no way you could be bearish or even neutral on silver (or gold). The “mood” should be perfect for a silver price spike based on what’s being talked about on the media.

Yet price action analysis tells a different story. That’s how you separate the noise from the reality. This is why you should shut off the news and watch what the price action is actually telling you

In this week’s session (recorded 02/29/2020) – I thought I would do something different.

And it turned out to be one the most powerful weekly video reports I’ve created.

With Coronavirus spreading at an uncontrollable rate and the impact playing havoc on markets, currencies and stocks – I wanted to give you a big overview of where the opportunities are hiding.

This video report also allowed me to show you how the patterns suggested what were going to happen before the news!

I also covered:

  • The HUGE misconception about Coronavirus impact on Gold and why a key reversal has already showed us what will happen next (watch from 9:38)
  • The one thing that I do every time that I open up a new market (all explained at 13:42)
  • Why the “damage has been done” on XUAUSD and what I predict will happen next after this week’s disaster.
  • A clear example of one of the biggest catalysts for a key reversal, when you should strike and my advice to you on where the next big key reversal is hiding (watch from 26:01)
  • Why I’ve been “camping out” while there has been so much uncertainty on key markets, but why a “1000 pips in a day” opportunity has been hiding in plain sight (and how you can get involved – (33:31)
  • The governing pattern on the GBPNZD that so many traders are missing and where the market is destined to go in the opposite direction to what everybody is expecting
  • My brutal advice on how you make money on trading that nobody wants to hear (yet is the most valuable lesson that any trader can understand – watch from 44: 30)
  • The case EVIDENCE that the market is ahead of the news with the clearest example that I’ve ever seen (all shared at 47:15)

Plus much more

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Hi, I'm Mark Shawzin. After working on Wall Street as a trader for 23 years, and managing private client accounts for the past 13 years, I've put together my 21 most powerful Forex strategies.

21 Forex Power Strategies by Former Merrill Lynch Trader

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