Tuesday, September 28, 2010

Markets have rallied in September amidst a wall of uncertainty. The Dow Jones Industrial Average (DJIA) gained 252 points (+2.38%) and the S&P 500 added 23 points (+2.05%) to extend the previous week's gains. For the month the DJIA is now up 8.33% and the S&P 500 is up 9.33% pushing both indexes firmly into positive territory. For the year, the DJIA is up 4.14% and the S&P 500 is up 3.01%.

Technology, Consumer Discretionary and Telecom were the best performing broad sectors while Real Estate, Financials and Utilities lagged. Real Estate, Consumer Discretionary, and Industrials have the strongest technical scores indicating greater relative strength over the past six months or so, while Financials, Health Care, and Energy continue to be at the bottom. Small- and Mid-capitalization stocks continue to outperform large cap stocks.

The MSCI (EAFE) World Index posted a weekly gain of 2.77% outpacing US indexes yet again and for the year is now down just 1.02%. This past week bucked the trend in place for most of the year as a number of European countries including Poland, Sweden, the Netherlands, and France, joined Thailand and Israel for top spots in the performance ranking. Chile, Austria and Malaysia were all positive but at the bottom last week. Thailand, Indonesia, Chile, and Malaysia remain at the top of the year's best performing countries of those I follow.

The Euro has surged in recent weeks closing Friday at $1.3491 up 8 cents (+6.4%) in the past two weeks as confidence in Europe grows and a belief that the Federal Reserve will begin to weaken the dollar in order to stimulate the US economy.

Gold has also surged recently pushing over $1300 per ounce recently. The reasons for gold's climb to new heights are tied directly to what is making the US dollar weak-the Fed.

Oil closed last Friday at $76.49 virtually unchanged and locked within the $10 trading band between $70 and $80 per barrel. This appears to be a sign that the oil markets and economic markets may be breaking their link that has been in place for much of the year. I have stated a number of times that oil appeared to be a barometer of the expected view of the global economy; however, it appears that oil is increasingly trading on fundamental market factors such as the swelling inventory of supply keeping a lid on oil prices.

US Treasuries have rallied these past two weeks driving yields back down to a Friday close of 2.6070%. Treasuries, the Euro, Gold, and Oil are all tied to a common view of expected Fed actions.

WHAT IS UP WITH THE FED?

When the Fed met on September 21st it set the stage for what has happened in the markets since. The Fed implied that the US economy is recovering at a slower pace than it would like, that inflation is lower than desired, and suggested that further "quantitative easing" is possible. This quantitative easing, or QE as the cool people like to call it, is simply how the Fed to sticks more money (money supply) into the economy to spur business activity (and inflation).

The Fed is able to control the money supply by the actions it takes with the Federal Open Market Committee (FMOC). In a simplistic explanation, the Fed simply buys bonds (government, agency and corporate) from banks for cash with the expectation that the banks will then lend the money to businesses to stir the economy. A key byproduct of this action is to keep interest rates low which in turn causes the US dollar to drop against other currencies. Let me explain how this happens.

All economics boils down to two words: supply and demand. Prices move in response to each. Interest rates are a signal of this tug-of-war between borrowers and lenders. By suggesting that the Fed will step in to help the economy expand, borrowers and lenders understand this means the Fed will buy bonds and significantly increase the supply of cash washing through the economy. With this large supply of cash relative to demand, interest rates are held in check. Because interest rates are low, lenders of cash will steer clear of lower returning bonds (i.e. US treasuries) and this in turn dampens the demand for US dollars in international markets pushing the US dollar down in value. See how these are all interconnected?

Finally, many investors fear that this injection of cash into the economy will spur high inflation. How much inflation is anybody's guess. The Fed will try to keep this inflation under control by continuing to manipulate the money supply. If the Fed fails, then there is the chance of much higher inflation. Fear of the Fed's inability to control inflation is prompting the push of gold prices to record highs.

Looking Ahead

The S&P 500 has moved and closed above 1140. This is a positive development for the equity markets and comes after several strong weeks. Not surprising, this move is coupled by US Equities moving into one of the two favored major asset categories (Cash was replaced) as reported by DorseyWright & Associates. International Equities is the other favored asset class. I am increasing my exposure to stocks at this point in time.

I continue to prefer small and mid capitalization stocks for the US market along with the most technically strong sectors such as Real Estate, Consumer Discretionary and Industrial stocks. Emerging markets remain favored with regards to international investments with an emphasis on the Asian markets.

Gold is at record highs and it remains a clear play on uncertainty. Oilappears range bound and I am very uncertain when it will break out one way or the other.

Bonds have continued their strength in 2010. I still favor a slight over-weighting in bonds.

The technical factors regarding the markets are positive and I am adjusting my weightings accordingly. However, there remains an undercurrent of concern about the economy in the form of slow economic growth, high unemployment, failing home prices, the specter of higher taxes, and questionable effectiveness of all the Fed's move to name a few. So while I am pleased at the recent strength in the markets, I remain very wary and on guard.

If you have any questions about the overall relative strength of your portfolio and would like my analysis, please do not hesitate to give me a call.

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income.

As always, if you have any specific questions on your portfolio or wish to talk to me, please do not hesitate to call.

P.S. If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Sincerely,

Paul Merritt, MBA, AIF(R). CRPC(R) Principal NTrust Wealth Management

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained. Technical analysis is just one form of analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable, however NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and are subject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.

The bullish percent indicator (BPI) is a market breath indicator. The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group. The basic rule for using the bullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold. The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe.

Securities and Advisory Services offered through Commonwealth Financial Network(R), Member FINRA/SIPC, a Registered Investment Adviser.

Monday, September 13, 2010

Markets posted gains for the second week in a row. Bonds have come under pressure.

The Dow Jones Industrial Average (DJIA) gained 15 points (+0.14%) and the S&P 500 added 5 points (+0.46%) to extend last week's gains. For the year the DJIA is now up 0.33% and the S&P 500 is down 0.50%. Consensus among the financial media attributes gains to growing confidence that a second recession will be avoided.

Biomeds, Drugs and Oil Service were the best performing sectors last week while Semiconductors, Textile and Household Goods were the worst. From a technical standpoint, Real Estate, Telecommunications and Utilities have the strongest scores while Health Care, Financials and Energy are at the bottom. Keep in mind that scores measure longer trends and do not reflect week-to-week changes necessarily.

The MSCI (EAFE) World Index posted a weekly gain of 0.91% outpacing US indexes, but remains down 5.2% for the year. Hong Kong, Sweden and Israel were the strongest and Spain, Belgium and Austria were the weakest of the countries that I follow. Developed European markets trailed the US and most other international regions with the Far East (less China and Japan) generally leading the way. International securities remains one of my two favored asset classes (Cash is the other) while US stocks, Commodities, Fixed Income, and Currencies sit on the sideline for now. Emerging markets remains the favored international category.

The Euro fell against the dollar closing at $1.2677 compared to last week's close of $1.2893.

Gold pulled back $4 an ounce closing on Friday at $1247.10. Gold continues to be a safe haven for investors against the uncertainty in world markets.

Oil added just under $2 per barrel to close $76.54 (+2.6%) from last week's close of $74.60. Oil has held up despite good inventories on hand and a strengthening dollar. I continue to believe that the price of oil is a referendum by energy traders on their global economic expectations.

US Treasuries continued a recent trend of rising rates which corresponds to negative price movement for individual bonds. The yield on the 10-year Treasury rose to 2.7936% from last week's close of 2.7133%.

BONDS IN THE NEWS

For the second week in a row the longer-term treasuries were the worst performing sector of the bond market. Collectively, the broad bond market was down about 0.50% while the long end (20-30 year maturities) was down over 1%. For the year, long-term Treasuries have been the best performing sector of the bond market. Many investors have considered the long end of the Treasury bond market to be highly priced (myself included). Investors have been buying Treasuries at historically low yields as a safe haven from the uncertainty surrounding the markets both at home and abroad. The two questions overhanging the bond markets are 1) whether or not investors will continue to accept extremely low yields or will they demand higher yields, and 2) does the recent rise in interest rates mark the beginning of a trend toward higher rates? The answer to these questions has enormous implications for policy makers, taxpayers, and investors because 60+% of all outstanding US debt matures over the next three years and will need to be refinanced. If rates rise substantially, the cost to taxpayers will be huge and squeeze the federal budget dramatically at a time when the commitment of tax dollars is growing.

For bond investors, higher rates will result in falling valuations. Investors who have poured billions and billions of dollars into bond funds could find their portfolios covered in more red ink. We must keep our eyes on the bond markets and not become complacent.

EUROPE SLIPPING BACK INTO THE NEWS

Concern over the strength of European banks has again come back into the news. When the results of the stress tests on the European banks by the Committee of European Bank Supervisors were released earlier in the summer, the markets were calmed because only 7 of the 91 banks evaluated had to raise capital. European stocks have rallied and the Euro has gained significantly. This debate over the stress tests will undoubtedly continue, but the answer will be found in the performance of the sovereign debt of Spain, Portugal, Italy, Ireland and Greece. This is another issue that must be watched carefully.

On a positive note, global banking regulators met in Basel, Switzerland, this weekend to hammer out new rules regarding reserve requirements for banks. Banking reserves are assets banks are required to hold to offset losses of band loans and other investments. The requirements were raised to 7% from 2% to 4% currently. The US wanted the new rules to take effect in 5 years but ultimately comprised to 9 as the Europeans were concerned that moving too fast could hurt their economies. I believe this is a positive move in the long run because it will help reduce the risk of future bank failures.

Looking Ahead

The coming week is the year's third Triple Witching which occurs when stock options, futures and futures options all expire on the same day. Friday, September 17th, will be the third such "triple witching" of 2010 (the last is in December). I mention this only because Triple Witching weeks have seen higher than normal volatility in markets as measured by the difference between the high and low of the week. Volatility does not care about direction. Over the past 20 years, 13 years have been up and 7 down.

I continue to watch the S&P 500 for a move above 1140 which will be a short-term indicator of strength and break the upper band in place since June.

I continue to prefer mid and small capitalization stocks. I believe large cap stocks paying a strong dividend (greater than the 10-year treasury) are especially attractive because stocks generally do well when interest rates rise. However, if the market becomes more risk tolerant, then these large cap stocks are likely to underperform the small and mid cap segments of the market. If interest rates continue to rise, bonds will lose value while stocks at least have a chance to maintain their values.

Gold is holding its value and is strong on a technical standpoint. Oil appears range bound for now, but I watch both commodity prices closely for trends.

Bonds remain under pressure. I favor corporate intermediate term bonds. High Yield bonds have shown strength in the face of a stronger equity market. International bonds, while a strong performer for the year, are under pressure recently and worth watching.

If you have any questions about the overall relative strength of your portfolio and would like my analysis, please do not hesitate to give me a call.

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income.

As always, if you have any specific questions on your portfolio or wish to talk to me, please do not hesitate to call.

P.S. If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Sincerely,

Paul Merritt, MBA, AIF(R). CRPC(R) Principal NTrust Wealth Management

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained. Technical analysis is just one form of analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable, however NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and are subject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.

The bullish percent indicator (BPI) is a market breath indicator. The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group. The basic rule for using the bullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold. The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe.

Securities and Advisory Services offered through Commonwealth Financial Network(R), Member FINRA/SIPC, a Registered Investment Adviser.

Tuesday, September 7, 2010

Markets rallied on signs that the US may be avoiding a second recession.

The Dow Jones Industrial Average (DJIA) gained 297 points (+2.9%)and the S&P 500 added 40 points(3.7%) to break a three week losing streak pushing the DJIA back into positive territory (0.19%)for the year. Positive, or should I say, less negative news on jobs and manufacturing gave investors confidence that the US is not sliding into a second recession. Strongest gains again were found in small and mid capitalization stocks while larger companies tried to keep up.

From a technical stand point, Real Estate, Telecommunications, and Utilities are the strongest sectors. From an absolute return basis, Real Estate, Financial, and Consumer Discretionary were the leaders last week while Utilities, Consumer Staples and Health Care were the weakest. For the year, Real Estate, Consumer Discretionary, and Industrials have provided the best returns. Information Technology, Energy, and Health Care have had the poorest year-to-date. Equal weighted indexes continue to outperform capitalization weighted indexes in the US. This is not surprising given the strength of the mid cap part of the markets.

The MSCI (EAFE) World Index posted a weekly gain of 4.0% continuing a recent trend of greater volatility than US indexes. For the year the MSCI (EAFE) World is down 6.1%. Australia, South Africa, and France were the leaders while Japan, Hong Kong and Taiwan were the worst performers last week. For the year, Thailand, Chile and Malaysia lead the way while Italy, Spain and France have been the laggards of the countries I follow. Emerging markets led over developed countries.

The Euro gained against the dollar closing at $1.2893 from last week's close of $1.2735. For the year the Euro is off 9.9% against the US dollar.

Gold gained another $14.20 (1%) closing the week at $1251.10. Gold continues to be a safe haven for investors against the uncertainty in world markets.

Oil pulled back slightly closing at $74.60 (-0.8%) from last week's close of $75.17. Oil has continued trading within a $10 range between $70 and $80 per barrel. I read one analyst who suggested that oil over $80 per barrel equates to $3.00 for a gallon of gasoline and when gas moves above $3.00 demand drops keeping oil below $80.

US treasuries pulled back on economic news this week. The yield on the 10-year note rose to 2.7133% up from last week's close of 2.6465%. The Friday to Friday close hides the real movement of yields as the 10-year yield fell below 2.5% early in the week. Not surprising, the longer-term treasuries were the worst performing sector of the bond market. Overall the bond market was down slightly for the week as investors gained greater confidence in the stock markets.

JOBS AND MANUFACTURING DATA BOOST CONFIDENCE

At the same time the overall unemployment rate increased from 9.5% to 9.6%, investors were encouraged by the creation of 67,000 private sector jobs in July. The general consensus is that this is a sign that the US economy is not going to slip into another recession. Overall, the job market shed another 114,000 jobs and notably the manufacturing sector shed 27,000 workers. While this may appear to be an encouraging sign in the private sector, one economist said that the US must create 300,000 jobs each month for four years just to regain the 8 million lost in the last recession.

Manufacturing improved last month as measured by the Institute for Supply Management's manufacturing index which rose to 56.3 from July's 55.5. Anything above 50 is considered to be expansionary. Simultaneously, China's manufacturing index also rose to 51.7 from July's 51.2. Investors see this as another sign that the economy is not going to fall off a cliff.

LOOKING AHEAD

Now that the summer holiday season is officially over, traders will be back to work in full force. They will be facing uncertainty, doubts about most things economic, and several trillion dollars are sitting on the sidelines as a result.

To quote Paul McCulley of Pacific Investment Management Company, "The market is schizophrenic. It would be foolish to have a tablepounding view short term on what stocks will do." This sentiment is reflected by the range bound nature of the markets. After breaking below the important support level on the S&P 500 of 1070 briefly, this index regained strength to close just above 1100-right in the middle of the current range. A move above 1140 will push through an intermediate point of resistance and be an encouraging sign. The DJIA's push above 10,400 is a very positive sign and momentum has turned positive for this index. Overall, my technical indicators, however, remain cautious. I continue to suggest maintaining an exposure to technically strong investments is prudent, but I would not overweight equities until a more sustainable trend is produced.

I prefer small and mid cap stocks over large cap. I do see renewed strength in the larger cap stocks and will watch this trend carefully.

Emerging markets remain preferred over industrialized countries with Thailand and Chile leading the way this year. Two powerhouses from last year, China and Brazil, have both posted negative returns this year and were also near the bottom last week of the countries I follow.

Bonds remain a solid investment. Last week's slightly negative returns reflect the return of higher interest rates. This trend must be watched carefully. Investors are still pouring money into bond funds. According to the Investment Company Institute, for the week ending August 25th, bond funds of all types attracted $5.9 billion while equity funds lost $4.6 billion. For the year, bond funds have taken in over $200 billion while equity funds lost $15 billion. I prefer intermediate maturity bonds and continue to believe that longer term bonds (especially US treasuries) are very expensive.

Last week's rally appears to be based more on investors coming back from double dip recession fears rather than on any solid economic data. The economy is inching along at an anemic pace and something needs to change. Looking over the last few months of the year, I have no doubt that markets will be heavily influenced by the political debate in the coming mid-term elections, and I will be vigilant to look for opportunities that may arise.

If you have any questions about the overall relative strength of your portfolio and would like my analysis, please do not hesitate to give me a call.

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income.

As always, if you have any specific questions on your portfolio or wish to talk to me, please do not hesitate to call.

P.S. If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Sincerely,

Paul Merritt, MBA, AIF(R). CRPC(R) Principal NTrust Wealth Management

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained. Technical analysis is just one form of analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable, however NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and are subject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.

The bullish percent indicator (BPI) is a market breath indicator. The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group. The basic rule for using the bullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold. The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe.

Securities and Advisory Services offered through Commonwealth Financial Network(R), Member FINRA/SIPC, a Registered Investment Adviser.

Thursday, September 2, 2010

Markets rose Friday (August 27th) on news that the 2nd Quarter Gross Domestic Product (GDP) was revised downwards to 1.6% instead of the anticipated 1.4% growth rate. Fed Chairman Ben Bernanke's comments on Friday from the Fed's annual meeting in Jackson Hole, Wyoming, also helped.

The news on Friday certainly helped the markets; however the Dow Jones Industrial Average (DJIA) posted another weekly loss of 63 points (-0.62%) for the week closing at 10,151. The S&P 500 lost 7 points (-0.66%) to close the week at 1072. For the month the DJIA is now down 3.01% and the S&P 500 is off 3.36%.

The MSCI (EAFE) World Index posted a narrower weekly loss of 0.22% on little news. The Euro gained slightly closing at $1.2733 from the previous week's close of $1.2705.

Gold gained just over $8 per ounce to close at $1237.90. Oil closed up slightly showing some strength for the first time in a couple of weeks.

US treasuries pulled back and the yield on the 10-year note rose to 2.625% from last week's close of 2.6160%.

FED PLEDGES SUPPORT FOR THE ECONOMY

The seemingly benign data changes from the previous week does not fully capture the market gyrations, especially Friday's jump in stocks of over 1.6% to help the week cut many of the losses from the earlier four days of trading. However, it is difficult to find much solace in the fact that the overall economy is slowing at an alarming rate at a time in the market cycle when the opposite should be occurring. Chairman Bernanke's expression of the Fed's support to do whatever it will take to keep the economy expanding gave the market's an important boost of confidence, but I remain cautious going forward.

Overall, bonds had a slightly negative week as a result of Friday's trading. Hardest hit were long-term US treasuries which had been showing a lot of strength recently. Bonds are priced for long-term weak economic performance and low inflation. Watching interest rates is extremely important in this current market because if rates start to rise, bonds could lose value and surprise investors who think of bonds as a "safe" investment. Nothing can be taken for granted.

LOOKING AHEAD

Markets are going to continue digesting every bit of economic news in these uncertain times. Volatility reflects investors' lack of certainty and they are swayed like tree branches by the prevailing breezes.

From a technical view, both the DJIA and S&P 500 are below support levels. The S&P 500 violated its long-term support line of 1070 last week. This support line had been in place since the market turnaround in March 2009. Last Friday notwithstanding, I believe the markets continue to show considerable weakness and investments should be made in only the strongest technical positions.

International markets and cash are currently emphasized among my broad categories (US Stocks, International Stocks, Bonds, Currencies, and Commodities) with international favoring emerging markets. Asia ex-Japan and Latin America have shown the greatest strength.

Utilities, Real Estate, and Telecommunication Services continue to show the greatest strength recently while Information Technology and Industrials were the weakest. Financials in general were just ok; however, I am concerned about the banking sector as many of the major banks have performed poorly and have low technical scores.

Bonds continue to be solid investments; but as I pointed out in my earlier comments, investors cannot close their eyes to interest rates and must be vigilant to rising interest rates and falling bond prices. I believe that for now that is unlikely to become a trend in the near-term. Gold remains my hedge against uncertainty.

The jobs report on Thursday will again be front and center on investors' minds as an indicator economic recovery.

If you have any questions about the overall relative strength of your portfolio and would like my analysis, please do not hesitate to give me a call.

Corporate bonds contain elements of both interest rate risk and credit risk. Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest, and if held to maturity, offer a fixed rate of return and fixed principal value. U.S. Treasury bills do not eliminate market risk. The purchase of bonds is subject to availability and market conditions. There is an inverse relationship between the price of bonds and the yield: when price goes up, yield goes down, and vice versa. Market risk is a consideration if sold or redeemed prior to maturity. Some bonds have call features that may affect income.

As always, if you have any specific questions on your portfolio or wish to talk to me, please do not hesitate to call.

P.S. If you think this type of analysis would be of benefit to anyone you know, please share this communication with them.

Sincerely,

Paul Merritt, MBA, AIF(R). CRPC(R) Principal NTrust Wealth Management

Past performance is not indicative of future results and there is no assurance that any forecasts mentioned in this report will be obtained. Technical analysis is just one form of analysis. You may also want to consider quantitative and fundamental analysis before making any investment decisions.

Information in this update has been obtained from and is based upon sources that NTrust Wealth Management (NTWM) believes to be reliable, however NTWM does not guarantee its accuracy. All opinions and estimates constitute NTWM's judgment as of the date the update was created and aresubject to change without notice. This update is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities must take into account existing public information on such security or any registered prospectus.

The bullish percent indicator (BPI) is a market breath indicator. The indicator is calculated by taking the total number of issues in an index or industry that are generating point and figure buy signals and dividing it by the total number of stocks in that group. The basic rule for using thebullish percent index is that when the BPI is above 70%, the market is overbought, and conversely when the indicator is below 30%, the market is oversold. The most popular BPI is the NYSE Bullish Percent Index, which is the tool of choice for famed point and figure analyst, Thomas Dorsey.

All indices are unmanaged and are not available for direct investment by the public. Pastperformance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe.

Securities and Advisory Services offered through Commonwealth Financial Network(R), Member FINRA/SIPC, a Registered Investment Adviser.

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