One of the great things about looking at investments purely on a technical basis is a lot (not all) the biases can be eliminated and a clear picture emerges of where an investment will be going.

For instance Gold (see chart) was clearly in an uptrend from 2009-2011 as evidenced by the fact that price was above its blue 50 period moving average.

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Then the unthinkable happened, gold began to consolidate for more than year and half. During this time, I have to admit that your guess would be as good as mine as to whether we would be heading higher or lower. In fact, I would say the odds favored a move higher.

Then in April 2013 we broke trend support (yellow line) and now the direction of gold is much clearer. That direction is down!

Do you see how in the uptrend, the price of gold would move up and then correct back towards the moving average? This is normal price action in an uptrend. Higher highs and higher lows is the norm.

The reverse will likely be true in this downtrend!

Right now we are quite extended to the downside in comparison to the blue 50 period moving average. So the chart watcher would expect a move back towards that moving average before we could see further weakness.

My guess is gold bounces here if it can hold above 1321 and bounces all the way up to 1550 to 1600 an ounce (at or just above the yellow line that was prior support now turned resistance).

Thereafter barring unforeseen market forces (i.e. Central Bank intervention), the trend should continue to the downside. A 61.8% retracement of the move from 2009-2011 would put a price target at roughly 1100-1150.

Disclaimer: This analysis is not meant as buy or sell recommendation. This analysis of gold is just for educational purposes.

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However, even the Amazing Jeffnick is occasionally wrong. One such case in point was last week where I thought for sure we would form a lower high in the market averages and then head lower for a more sustained correction. I certainly had seasonality on my side!

Even as I reviewed the stock charts this morning, I still believe my base case for a correction could still come true, but it is far from a certainty.

However, one of the things that any investor must do well, even the Amazing Jeffnick, is knowing when to change their based assumptions. One of the most costly things you can do as an investor is to hold to one thought process of where markets are headed and not be continually challenging that initial base case. Failure to do so can cost you money!

That is one of the great things about trend following (how we deliver our stock-signals signals). Since trend followers look for an initial entry after a trend has already been developed and then only look to exit on a confirmed reversal of that trend, they are never taken in by faulty base assumptions.

Sure a trend may not continue and reverse quickly causing a small loss. However, the trend follower is a man of fact. A typical trend follower will say "I have a trend and I will hold this trend until it ends."

So besides trend following what else can an investor do to make sure they stay flexible and on the right side of the market?

Might I suggest a routine that changed my investment life. Yes really!

That routine is simply that I sit down once per week and I look at my trend following models, stock charts and my current positions. Each week I draw a new conclusion about where the markets and my positions may be going. I totally throw out the prior week's assumptions.

So this allows me to stay flexible, keep my ego out of the equation and stay on the right side of market and positional trends.

I can remember when Wayne and I first started more actively trading in our sister wealth management firm (see www.intrustadvisors.com) we would form a market consensus and then broadcast it to the world as gospel. I think we fancied ourselves as Captain Morgans of the investment world. You know the commercials where they always act so confident and then strike the Captain Morgan pose with one leg in the air.

Funny thing happened. We were wrong more than we were right. Markets have a tendency to humble even the most astute investors. What also happened is that by sticking to our original consensus, we lost money (lots of money at the time).

So don't be a Captain Morgan! Instead be a flexible investor who is willing to admit he/she was wrong and go a different direction. This simple change in your investment philosophy will yield you significantly better returns and isn't that what we are here for anyways.

Fyi…in case you are wondering, I do this once a week market review on Saturday mornings. I find that if the markets are closed, I am calmer and can see what is really happening with greater clarity. Try it for yourself and let me know how you do!

I had told our subscribers to expect such a possible retest of the highs and that is just what we got. What I did not expect is that we would find a way to put in new incremental highs.

Here is how the averages performed in April:

All three major indexes moved higher and surprisingly the NASDAQ led the way for the month outperforming the other indexes over the last few days of the month while playing catch up.

Where we go from here is really anybody's guess. I would normally say that we are entering a soft season of the year for equities (May - October). However, let's face facts, markets are no longer being driven by fundamentals but by Central Banks.

This was no more evident than in Europe in April as member nations continued to produce weak GDP numbers and forecast slowing growth, but European markets instead of correcting (as the charts and our trend models seemed to indicate) rallied to new highs on the ECB's perceived change of heart on austerity and the possibility of further easing in Euro land. It was this technical weakness followed by strong anticipatory price moves against our inverse/short position that was the primary reason our sample model portfolios and our EAFE Index signals underperformed.

Stock-Signal.com performance was generally strong for the month. The two exceptions being our EAFE models which, as explained earlier, hurt us in April. The other exception was our Long signal in the U.S. dollar, which took a break in April as equity markets rallied and the dollar resumed its negative correlation to such markets.

Our strongest Stock-Signal performances were in the DB Commodities Index and the London Gold Index. Our models had subscribers inverse (short) both indexes and we cleaned up as a result. On a technical basis both markets appear to have further downside after the current counter trend bounce in each is completed.

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Our sample Equal Weighted portfolio returned a solid +.59% before commissions, fees or other trading costs.

Our sample Global Opportunities portfolio returned 1.88% before the same costs. Both portfolios were negatively impacted by our EAFE signals for the month, however, the Global Opportunities portfolio was able to overcome this loss with large gains in gold and commodities as mentioned previously.

Overall, we made money, which is always the goal! The S&P 500, however, has clearly been the winner and has left our sample portfolios in the dust for the year-to-date period. This kind of disparity between index performances rarely lasts forever and I would expect that our other index signals will pick up in the coming months. However, I would also like to state this is no normal market. In all my years of investing, I have never seen a market so tied to Central Bank intervention as now. It is like a bunch of junkies looking for a fix and the Central Bank is the glad supplier!

We broke to new multi-year highs on all the major indexes in April. I would have bet you "dollars to donuts" we would have seen a top at the end of April, but we did not. So now the million dollar question is where will stocks go from here. My guess is we continue to grind higher.

I watched Carter Worth on CNBC explain how he thought the divergence in sector investing between low volatility sectors and higher beta/volatility sectors would eventually lead to a nasty shakeout. He made the point (that we have seen in our managed accounts and are exploiting) that money has flowed to lower growth, low volatility sectors in excess. While at the same time higher growth sectors continue to struggle in terms of growth expectations and money flows.

Now Carter may be right, but it seems to me we are in a bubble environment and bubbles tend to go much farther than anyone would expect. Low volatility just seems to be the bubble de jour!

Speaking of bubbles…is gold the most recent bubble to pop? I have a good friend who keeps warning me about an impending short squeeze in gold and a new move to highs based on buying by the hard metal suppliers. However, when I look at the charts all I see is a counter trend bounce and the possibility for more weakness over the balance of the year. We will have to see who is right!

So bottom line: this is a very exciting market, but it is fraught with danger! Make sure you know where the exit signs are and that someone is paying attention because these upward bubbles could burst at any time. May I suggest to you a Free Trial to Stock-Signal.com. We will help you stay on track and out of trouble, especially if this raging bull turns to bear.

Disclosure: I am long [[EFA]], [[SPY]], [[QQQ]], [[HYG]], [[CMD]], [[UUP]], [[DGZ]].

In this post, we are going to take exposure to a whole new level. This week we will explain Beta Exposure.

Yes, that is right! Beta exposure.

I am sure you may have heard a smart sounding portfolio manager talk about his beta exposure on CNBC and wondered what the heck he was talking about? Well now you too can amaze your friends families and sound smarter than anyone should be by using this term too!

So let's start with the basics. What is Beta?

According to www.investopedia.com, beta is "a measure of volatility, or systematic risk, of a security of portfolio in comparison to the market as a whole." In English, it is how much a security moves in relation to its benchmark.

As an example, an ETF like the iShares Dow Jones Select Dividend Index (DVY) has a beta of .70 as compared to its benchmark, the S&P 500. This means when the S&P 500 moves up 1%, it is likely DVY has only moved up .70%. If the S&P 500 likewise falls 1%, it is probable that DVY will only fall .70%. So it is less volatile than the underlying index and has a lower beta.

Here is another example, the Materials Select Sector SPDR (XLB) has a beta of 1.2 as compared to its benchmark, the S&P 500. This means when the S&P 500 moves up 1%, it is likely XLB has moved up 1.2%. If the S&P 500 likewise falls 1%, it is probable that XLB will more than 1.2%. So it is more volatile than the underlying index and has a higher beta.

So what does this have to do with portfolio exposure?

Easy! Smart managers also look at their overall portfolio on a beta basis. In English this means they determine the weighted average beta for all their holdings relative to each holdings percentage of the total portfolio. The total of these betas is the portfolio beta.

When managers feel markets may turn choppy or decline, they attempt to reduce the beta of their holdings by selling high beta positions and buying lower beta positions. When managers feel markets want to head up, they tend to increase the beta of their holdings by purchasing higher beta positions.

In layman's terms, it is a way of keeping the same number of positions but either supercharging the ability of those positions to outperform or, in the case of lowered beta, reducing portfolio risk while still keeping the present exposure.

So just recently you heard me say that our equal weighted portfolio was now 50% exposed to the market (75% net long and 25% net short). I also told you that same exposure was just .06 on a beta basis.

So if the beta for the S&P 500 is 1.0? Am I leaning towards more aggressive beta exposure or less beta exposure?

If you said, less aggressive beta exposure, give yourself a pat on the back.

Disclosure: I am long [[SPY]], [[EFZ]], [[QQQ]], [[HYG]].

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My definition of market exposure in financial terms is the proportion of money invested and subject to market risk.

In general there are two basics types of exposure: Gross and Net.

Now here is where the confusion starts for many and it is what I hope to clear up today!

Gross exposure is defined as the total investment dollars invested as a percentage of your total portfolio in dollars. Yes, this could be total investment Yen invested as a percentage of total portfolio dollars in Yen? It can apply to any currency.

So let's do a few basic examples"

You have a portfolio valued at $100,000 (U.S.) and you invest $80,000 in 4 ETFs.

So $80,000 divided $100,000 equals 80%. So your market exposure is 80% gross long.

You again have a portfolio valued at $100,000 (U.S.) and you invest using margin in equities with value of $120,000 (U.S.).

So $120,000 divided $100,000 equals 120%. So your market exposure is 120% gross long in this case.

Now that is gross exposure. There is also net exposure.

My definition of net exposure is that it is gross long exposure minus gross short exposure.

So again here are few examples:

You have a portfolio that is valued at $100,000 (U.S.) and you invest 75% in a long portfolio of ETFs and you invest 25% in an inverse ETF.

So you have $75,000 gross long and $25,000 gross short, your net exposure is $50,000 or 50% ($50,000 / $100,000).

Your gross exposure is $100,000 or 100%.

Confused…let's try another one.

You have a portfolio that is valued at $100,000 (U.S.) and you invest 120% in a long portfolio of ETFs and you invest 30% in short portfolio of stocks.

So you have $120,000 gross long and $30,000 gross short, your net exposure is $90,000 or 90% ($90,000 / $100,000).

Your gross exposure is $150,000 or 150%.

So there you have it. The next time we tell you that our equal weight sample portfolio is 100% invested on a gross basis all the time, but is currently on 50% invested on a net basis. You will know exactly what we mean.

By the way, example 3 is our current exposure in the equal weight portfolio. As I write this markets are off big and I am thankful to only have net exposure of 50%, 37% on a beta basis (more on that later).

Simple answer: We did!

How did we know? This period has closely tracked the same period last year. That is how!

So a tough, but positive February blossomed into a strong, but volatile March. Stick with us, later in this post I will give you some insight on where markets might be heading from here.

March was a great month for the S&P 500, but interestingly other U.S. and international indexes did not perform as well. For example, the High Yield index continued its 2013 underperformance only bringing .+33%. While hot foreign markets cooled some over the bailout of the country of Cypress and returned just +1.31% in March.

The result was that your performance in March was greatly dependent (as always) on the index or indexes you chose to follow. If you picked to follow our gold or commodities signals in March, you lost money (-.95% and -.66%, respectively). Gold and commodities decided to rally in March despite a rally in the U.S. dollar. Commodities and gold are usually negatively correlated to the U.S. dollar, not positively correlated!

So Stock-Signal.com performance for the month was generally positive, but a mixed bag.

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Our sample Equal Weighted portfolio returned a solid +2.16% before commissions, fees or other trading costs. Our sample Global Opportunities portfolio returned a less stunning 1.16% before the same costs as it was negatively impacted by the aforementioned losses in our gold and commodities signals.

Overall, we had a good month! The S&P 500, however, has clearly been the winner and has left our sample portfolios in the dust for the year-to-date period. This kind of disparity between index performances rarely lasts forever and I would expect that our other index signals will pick up in the coming months.

We stated last month that the powers that be will continue to juice this market higher into April. Now that we have entered April, it will be important to watch the intraday highs on the S&P 500 of 1476. We have already exceeded the daily closing high.

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Our guess is that we make new highs on the S&P 500. We have already put in new highs on the Dow Jones Industrial and Russell 2000 averages. However, the volume behind this advance has been anything but impressive. This would lead us to caution investors to be careful!

The fact that we set new highs will in our opinion not necessarily set up further advances, nor a new bull run. In fact, we think these new highs will suck in more sideline money just in time for a significant corrective move in late April or early May. So the watch word here is to stay awake and, if you are a subscriber of Stock-Signal.com, watch our signals carefully.