Wednesday, December 22, 2010

US equity markets continued their recent strength while Europe remains stymied as it sorts out the on-going debt crisis giving strength to the US dollar. US treasuries staged a small rally at the end of the week, and there was little news from China to move the markets.

For the week, the Dow Jones Industrial Average (DJIA) gained 82 points (+0.72%) ending the week at 11,491.91. The S&P 500 gained 4 points (+0.28%) to close Friday at 1243.91. For the year the DJIA is up 10.2% and the S&P 500 is up 11.6%.

Health Care, Consumer Discretionary, and Materials were the best performing broad sectors last week while Financials, Real Estate, and Technology brought up the rear. Year-to-date the top three broad economic sectors are Consumer Discretionary, Industrials, and Materials while Utilities, Health Care, and Financials remain at the bottom. Real Estate has fallen out of the top three broad sectors for the year for the first time in many months (it remains 4th on the list) so I will continue to watch this sector closely.

The MSCI (EAFE) World Index lost 0.1% for the week and is now up 2.6% for the year. Chile, Sweden, and Taiwan were the top performing countries I follow this week while Indonesia, Turkey, and Vietnam were the bottom three. For the year, Thailand, Chile, and Indonesia are the top performing countries and Spain, Italy, and France are the worst. The European debt crisis emerged as the number one financial story this week and I will discuss in greater detail below.

The Euro fell 0.5 cents against the US dollar last week to close Friday at $1.3181 from the previous week's close of $1.3229. The US dollar has posted gains against the Euro for the past five of six weeks as investors shun the Euro over continuing European debt worries and improving US bond yields.

The 10-year treasury closed the week at 3.3376% up from the previous week's close of 3.229%. The bond market's volatility and yields have been rising as investors are eyeing renewed strength and optimism in equities. The long-end of the yield curve (bonds with maturities 20 years and greater) has been hardest hit. All bonds rallied a bit on Thursday and Friday as investors started taking advantage of the recent price declines and news that there was an outside chance that the Build America Bond program could be renewed in the next Congress. Trading in municipal bonds is expected to be light as the year comes to a close.

Overall commodities posted gains for the week. Gold fell slightly closing at $1376.00 Friday from the previous week's close of $1384.90. Oil increased to $88.07 per barrel from the previous week's close of $87.79. Gold continues to be a hedge against uncertainty in global markets and oil's value reflects expectations of coming global growth and demand.

THE COUSIN EDDIE OF FINANCIAL MARKETS

For those of you who do not watch the Vacation movies regularly like I do, you may not be familiar with Cousin Eddie. Cousin Eddie is the uninvited family member who arrives at Chevy Chase's house at the worst possible times and overstays his welcome. The European debt crisis is the Cousin Eddie of global financial markets.

At the heart of this crisis is the realization that this problem is enormous and will not go away without major structural changes. Greek protesters have taken to the streets again, the Irish government fell after accepting the European Union (EU) and International Monetary Fund (IMF) bailout, and Spain is now under increasing pressure from the bond market as fears grow that its banking system cannot survive without massive support (and lots of Spain's debt is also owned by Germany, France and others). In response, the EU's finance ministers just completed the last summit for 2010 and announced an agreement to replace the current emergency rescue fund with a permanent crisis-finance program. The proposals call for greater enforcement powers for the EU and European Central Bank (ECB) to dictate actions to be taken by the bailed-out country and discipline them for not adhering to those guidelines. In other words, the EU is coming to grips with the fatal flaw of having a common currency without a means of controlling the spending and borrowing activities of its member nations. It is the equivalent of giving your Cousin Eddie a credit card with no limit and always being on the hook for paying his bills-eventually you will grow tired of using your own hard earned money to pay for his spendthrift ways. To help control Cousin Eddie you put limits on his spending and require that he start making payments to you.

Brian Carney and Anne Jolis wrote an excellent column titled, "Toward a United States of Europe" in the Wall Street Journal's weekend edition (December 18, 2010) discussing the challenges facing the EU. The article highlights comments from French Finance Minister, Christine Lagarde, who says that for the EU to work, its countries are going to need greater coordination between member countries if the EU is to survive. The individual members of the EU are going to have to answer more and more to the EU and ECB. Also at stake is nothing less than the sovereignty of individual nations. Germany is at the top of the list of countries who do not want to bailout weaker, more undisciplined, member nations. However, an argument can be made that the German's have little choice because failure of the EU would do enormous economic harm to Germany and global financial markets. In the end, the EU could end up like the United States with a strong central/federal government and satellite countries/states. The question remains if independent nations are prepared to give up their sovereignty for the good of the European Union.

The resolution of the European debt crisis is of great importance to all of us. You may be asking why this matter should be a major concern of the United States. It is not our debt, we don't have the Euro as our currency, but the fact is global financial markets are extremely intertwined. This interrelationship of the banks internationally is similar to concept of the Federal Reserve's decision to bailout AIG at the height of the US economic crisis. AIG was perceived, because of its relationship with nearly every major bank and investment firm in the US, as too important to fail. Europe and the United States are intertwined and so what happens in Europe will impact on us here.

Looking Ahead

The momentum behind equities, especially US stocks, has continued to build. With Congress passing a continuation of the Bush-era tax rates, the defeat of the $1.2 trillion omnibus spending package in the Senate, and the release last week of a positive report on the leading economic indicators, there is some basis for this momentum. It is hard to tell how much movement will occur in US stock markets near-term because I believe much of that news is already factored in.

I am not, however, an unconstrained bull. I do believe that we are closing out 2010 on a relatively positive note and I am glad for that. I also believe that continued exposure to stocks is warranted at this time, but I also realize that there continue to be headwinds on the economy that must be watched closely. At the top of my list of concerns are the persistently poor housing market and an unemployment rate that is approaching 10%. So while I continue to invest in stocks, I am looking over my shoulder for any signs of market deterioration. Again, the benefit of following a technical discipline from data provided by Dorsey Wright & Associates is that it helps to strip away the emotion and clutter surrounding the headlines each day.

There were no changes in my overall technical indicators last week. The New York Stock Exchange Bullish Percent (NYSEBP) increased slightly from 77.55 to 77.82. A reading over 70% is an indication that stocks are strongly favored but risk for a correction is present. Stocks are still favored over bonds. Mid and small-cap stocks are preferred over large cap, and growth is favored over value. I prefer emerging markets and recommend staying away from developed Europe. Emerging markets have been showing weakness recently, but it still tops my list of key indicators on a relative strength basis so I will continue recommend these investments in portfolios. I remain committed to maintaining an investment in commodities as a hedge against rising prices.

Bonds improved slightly this week and I maintain that bonds should remain within portfolios at this time. Many bond sectors have performed well this year and I remain committed to bonds in allocations appropriate for varying risk tolerances.

I hope that during this holiday season each of you has the opportunity to gather with your families and friends and share the joys that come from such camaraderie. In the final analysis what we ultimately have is each other and the love and kindness shared together. I again ask that we remember the brave men and women who are not able to be with their families as they defend our shores from those who do not share our values.

Happy Holidays!

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.

Emerging market investments involve higher risks than investments from developed countries and also involve increased risks due to differences in accounting methods, foreign taxation, political instability, and currency fluctuation. The main risks of international investing are currency fluctuations, differences in accounting methods, foreign taxation, economic, political or financial instability, and lack of timely or reliable information or unfavorable political or legal developments.

The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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.

Friday, December 17, 2010

US equity markets continued to show strength in a week that was marked by high drama on Capital Hill and China announced another 0.50% increase in their banking reserve requirements in the face of continued inflation worries. European debt problems fell back into the shadows and commodities took a breather, while Euro fell against the US dollar and US treasuries continued their sell-off.

For the week, the Dow Jones Industrial Average (DJIA) gained 218 points (+1.95%) ending the week at 11,410.32. The S&P 500 gained 16 points (+1.28%) to close Friday at 1240.4. For the year the DJIA is up 9.4% and the S&P 500 is up 11.2%.

Financials, Telecom, and Technology were the best performing broad sectors last week while Real Estate, Utilities, and Energy brought up the rear. Year-to-date the top three broad economic sectors are Consumer Discretionary, Industrials, and Real Estate while Utilities, Health Care, and Financials remain at the bottom.

The MSCI (EAFE) World Index lost 0.9% marking the 5th consecutive week this broad international index has fallen under the heavy burden of debt concerns in Europe. Also hit hard were some of the darlings in international investing this year and past: Turkey, China, and Brazil. Israel, Ireland, and Austria were the best performers last week. China remains the focus of the investment media and most traders. More on that below.

The Euro fell 1.8 cents against the US dollar last week to close Friday at $1.3229 from the previous week's close of $1.3414 and is virtually unchanged for the month. Much of the US dollar's strength continues to come even as the Federal Reserve remains committed to its bond purchase program (QE2). The reasons for the rise of the US dollar in the face of QE2 have several components. First, international investors are buying US dollars to buy treasuries as rising yields make them more attractive. A second, and perhaps dominant reason, is safety. As investors fear what is happening on a global stage-particularly in the Euro Zone, the US dollar continues to be the place park cash. The strength of the US political system trumps other fears like inflation.

Gold gained and oil pulled back last week as commodities in general fell slightly on worries that as the Chinese central bank continues to restrain growth, global demand for commodities will fall as well. The general trend of commodities has certainly been positive and I believe in a growing economic scenario, this trend will continue.

Bond investors continue to see portfolio values fall as interest rates rise. Rates on the benchmark 10-year treasury closed Friday at 3.229% from the previous Friday's close of 3.0167%. The last time rates were at this level was late June of 2010. Municipal bonds continued their pullback primarily on concerns that Congress may not extend the Build America Bond (BAB) Program. BAB's are state and local government issued bonds whose interest payments are partially subsidized by the federal government. The program has been very popular with states that have the greatest debt problems including California, Illinois, New Jersey and New York. The program has come under scrutiny by Republicans over concerns that the program allows states to continue issuing debt for spending they cannot afford and the federal government is incurring additional financial obligations.

CHINA CONCERNS

China released data over the weekend showing inflation for November jumped to 5.1% year-over-year (YOY). This follows October's YOY increase of 4.4% and these increases clearly have the Chinese central government concerned. Over the weekend, China announced that it would raise yet again the bank reserve requirement from 18% to 18.5%. This move is designed to withdraw money from the Chinese economy by reducing the amount of money lent by Chinese banks. The greatest worries about the Chinese economy are focused on real estate development. Depending on who you read, some analysts believe the Chinese have massively over-built and everything from shopping malls to apartment buildings remain empty and unsold. China is not as transparent as Western countries but these concerns about the underpinnings of the Chinese economy must be watched closely.

Because nothing is all one way or the other, November export data for China showed a 34.9% YOY increase in exports and can be interpreted as a clear positive for US and European demand which bodes well for bulls. This is a great example of the general tug-of-war that currently exists between pro-growth bulls and cautious outlook of the bears.

The pause in commodity prices this past week can also be attributed to fears of a slowdown within China. If demand, or expectation of demand, goes up; commodity prices will likely follow.

Looking Ahead

At a recent conference I attended, Bob Doll (Vice Chairman of BlackRock) said that there are times when the economy and stock market do not necessarily move in tandem. Times like this are a good example of this view. The jobs report released on December 3rd showed unemployment jumping up to 9.8% and many pundits say 10% is not far behind. Home prices remain stuck or decreasing. I read a report in Bloomberg which said that nearly 24% of all homes in the US are currently worth less than their mortgages. Yet the stock market is showing renewed strength.

The cross currents in the global economy are impacting the markets with the equity markets winning out recently. The two major issues facing investors are the fears related to excessive borrowing by the developed economies and the sustainability of the economic recovery. The bears fear mounting debt will stifle economic growth, while the bulls see the world economy rebounding and growth rates returning to more normal levels. It appears that the headline of the day drives market returns.

The stock market is also watching the debates in Washington over the tax rates and other fiscal policy issues in Congress. Do not underestimate the importance the markets are placing on a satisfactory resolution of the compromise reached by the President and the Republicans.

When there is so much uncertainty about how the economy is going, the value of the technical research I use with Dorsey Wright and Associates is even more important. Looking at the current market technicals, the New York Stock Exchange Bullish Percent (NYSEBP) closed last Friday and a very strong 77.55. A score over 70 indicates an overbought status of US stocks and that risk levels are high, but does not indicate when a major sell-off may occur. Stocks are favored over bonds. Mid and small-cap stocks are preferred over large cap, and growth is favored over value. Another change occurred in the Dorsey Wright Dynamic Asset Level Indicators (DALI) where Real Estate fell out as one of the favored sectors. This adjustment is not a reason to sell real estate investments; rather it is more a move to place these investments under greater scrutiny. International stocks continue to be favored. I prefer emerging markets and recommend staying away from developed Europe. Equal weighted indexes are preferred over capitalization weighted indexes.

I remain committed to maintaining an investment within commodities as a hedge against rising prices. If manufacturing remains strong in China, commodity prices are likely to continue rising.

US bonds continue to pull back as interest rates rise. I will repeat my view that bonds should remain within portfolios at this time and December can be a difficult time as inventories can get skewed. Bonds have pulled back from an overbought status to an oversold status, but for the most part have not violated support lines and should therefore be retained in portfolios. Like real estate, this pullback warrants close scrutiny.

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.

Emerging market investments involve higher risks than investments from developed countries and also involve increased risks due to differences in accounting methods, foreign taxation, political instability, and currency fluctuation. The main risks of international investing are currency fluctuations, differences in accounting methods, foreign taxation, economic, political or financial instability, and lack of timely or reliable information or unfavorable political or legal developments.

The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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, December 2, 2010

US markets were relatively calm compared to International markets which were hit hard by North Korean aggression on South Korea and the on-going Irish bailout. The Euro continued to pull back against the US dollar and US treasuries rallied on the uncertainty abroad.

For the week, the Dow Jones Industrial Average (DJIA) lost 112 points (-1.0%) ending the week at 11,092.00. The S&P 500 lost 10 points (-0.9%) to close Friday at 1189.4. For the year the DJIA is up 6.4% and the S&P 500 is up 6.7%.

Real Estate, Consumer Discretionary, and Technology were the best performing broad sectors last week while Financials, Energy, and Health Care brought up the rear. Year-to-date the top three broad economic sectors are Consumer Discretionary, Real Estate, and Industrials while Health Care, Utilities, and Financials remain at the bottom.

The MSCI (EAFE) World Index lost 3.5% on fears that Portugal and Spain were not far behind Ireland. The cost of the Irish bailout increased last week from an estimated €50 billion ($68 billion) to €67.5 billion ($89 billion). The worst performing countries last week were Spain, Ireland, Turkey, and Italy. All but Turkey are at the center of the European debt crisis. While emerging markets were also hit, developed international markets were hit harder. Other than Turkey, the other non-European country hit hardest last week was, not surprisingly, South Korea. China fell again, but not as severely as those already mentioned. Peru, Canada, and Chile were the strongest countries of those I followed last week.

The Euro fell 4.5 cents (-3.27%) against the US dollar last week to close Friday at $1.3238 from the previous week's close of $1.3686. The month long rise in the US dollar reflects investor fears of debt and war worries. These same worries sent US treasuries higher as the 10-year yield fell to 2.8699% from last week's close of 2.8750%. Gold rallied $10.60 (0.78%) to close the week at $1364.00. Investors are seeking security right now in both the equity, bond, and precious metal markets.

Oil prices rallied $2.16 per barrel closing at $83.76. Oil analysts are somewhat bearish on their outlook, however, as the rising dollar slows purchases (everyone buying oil in other currencies must pay more) and concerns that Chinese rate tightening will curtail that country's demand going forward.

THE WORLD IS A BIT MESSY

The news that North Korea launched an hour-long artillery barrage against a small island town in disputed waters just of the coast of both countries reminded investors that there are other worries beyond the impact of QE2 on world economies. Yet, when the dust settled, US markets were again relatively neutral in price movements. I believe this is attributable to a series of regularly (albeit minimally) improving US economic numbers on jobs, manufacturing, and retail sales.

Europe remains embroiled in the fallout over debt levels of the weaker European Union (EU) members and ultimately the viability of the Euro currency for some of these countries. European leaders have been working furiously to complete the Irish bailout agreement. As of early Monday morning (November 29th), the EU finance ministers agreed on a the terms of the bailout and a compromise regarding a demand by German Chancellor, Angela Merkel, that bond holders would share the cost of potential sovereign debt restructuring beginning in 2013 with tax payers. The final agreement has been modified to state that bond investors will be asked on a "case-by-case" basis to accept losses on their bond investments. Concerns by some of the weaker countries like Ireland and Italy were that if Merkel's demand for mandatory private-sector write-downs were included in the new European-wide bailout fund, then borrowing costs would escalate and greatly weaken already fragile government balance sheets. To sound, yet again, like a broken record, all that has been accomplished in Ireland (as it was in Greece) is to kick the debt can down the road for a few more years in hopes that an improving economy and government austerity programs will allow these governments to get onto sound economic footing. If this does not happen, I believe it will be hard for the Euro to remain the common currency for all current members.

Expectations are that China will continue to take steps to hold down inflation. The central bank of China has already announced that reserve requirements will increase from 17.5% to 18%, but beyond that, there remains uncertainty on exactly what form further tightening will take. Fed Chairman Bernanke has led US calls for China to let the yuan trade freely (as opposed to being artificially pegged to the US dollar) which would have an immediate impact of raising the cost of Chinese exports and an immediate slowing of the Chinese economy. While this debate goes on, investors believe some slowing will come. The falling price of commodities and sell-offs in Asian markets indicate that investors believe the Chinese economy will slow in the months ahead.

Finally, the North Korean problem continues to threaten peace on the Korean peninsula. Senior Chinese diplomatic officials visited Seoul over the weekend seeking South Korea's support of renewed talks with North Korea, Japan, Russia, China, the US and both Koreas. This suggestion was not well received as the South Koreans (as well as the US) believe these talks reward North Korea's behavior. The US and South Korea began joint naval exercises in the region to signal the US's support for Korea. China, as North Korea's benefactor, holds the key to getting North Korea to step back from its provocations with the South. You may be wondering why North Korea (with China's tacit support) would take such dramatic action against South Korea, and the answer is actually quite simple-resources. The history of the US and its allies has been to negotiate with North Korea and provide them all sorts of economic benefits. These benefits reduce the amount of support the Chinese have to provide its ally. It remains to be seen if this tactic will work one more time.

Looking Ahead

As a result of the turmoil abroad, the US dollar continues to strengthen. As I have noted previously, this near-term rally would help US equities across the board. The fairly sizable out-performance of US equities over international stocks and bonds last week reflects this dynamic. I continue to believe that the US dollar/Euro relationship is a key indicator towards global growth and strong equity performance.

The New York Stock Exchange Bullish Percent (NYSEBP) increased slightly last week to 73.93 from the previous close of 73.71. A score over 70 indicates an overbought status of US stocks and that risk levels are high, but does not indicate when a major sell-off may occur.

The most notable change in the Dorsey Wright Dynamic Asset Level Indicators (DALI) was mid-capitalization stocks have become favored replacing small cap stocks as the preferred capitalization weighting. Small cap stocks had been favored since April 2009, so this is a relatively important signal. At the broadest level, US and International stocks continue to favored. One or two sub-par weeks in the markets are not enough action to force international stocks out of its favored status. Commodities remain strong but have also come under some stress over the China inflation issue. US bonds strengthened last week. Longer-term treasuries and municipals rallied after falling the past few weeks while international debt pulled back in concert with international equities.

Mid-capitalization and small-cap stocks continue to be favored over large caps. Equal-weighted indexes (which will include more mid cap stocks) remain favored over capitalization-weighted indexes. Emerging markets remain favored over developed markets.

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.