Amidst headlines proclaiming progress is being made in Europe's efforts to fix the Greece problem, US and global markets surged this past week. US retail sales figures released on Friday also gave investors hope that the likelihood of a double dip recession has receded for now.

The Dow Jones Industrial Average (DJIA) had its second best week of 2011 gaining 4.88% (541 points) last week while the S&P 500 gained 5.98% and the Russell 2000 rebounded with an 8.57% increase. While Thursday's initial jobless claims report remained above 400,000 giving little hope that the jobs picture would improve this year, retail sales grew by 1.1% in September marking the strongest gain in 7 months. For the year, the DJIA is now back in positive territory gaining 0.58% while the S&P 500 remains down 2.63% and the Russell 2000 is off 9.08%.

Like the markets, the major US economic sectors have failed to find any consistency. Early year leaders Energy, Information Technology, and Materials returned as the top performers for the week, while the current year's leaders Consumer Staples, Utilities, and Health Care were the bottom three performers this past week. All but the bottom three sectors outperformed the DJIA for the week and all eleven sectors were positive. For the year, Consumer Staples, Utilities, Health Care, Information Technology, and Consumer Discretionary are all positive and outperforming the DJIA. Financials, Materials, and Industrials remain firmly at the bottom.

The MSCI EAFE was positive for the third consecutive week gaining 4.49% and is now up 9.90% since the September 23rd close. Investors are clearly buoyed by developments in Europe and hope that political leaders are making progress in fixing the debt crisis. As I noted last week, I support efforts to improve European bank capitalization, but there is a long way to go before the all clear signal can be given.

Confidence in the Euro continues to gain momentum as the Euro rallied last week picking nearly 5 cents on the US dollar closing Friday at $1.387 marking its highest close against the US dollar since September 15th. The US dollar has weakened steadily against the Euro and other currencies since early this month as fears about a Lehman Brothers-esque style collapse in Europe subsides. This reversal of the US dollar has corresponded with an increasing trend in commodity prices and US Treasury yields.

Commodities in general have been in a positive trend after the Dow Jones UBS Commodity Index bottomed on October 4th rising 7.3% from that date with 4.5% of the increase coming this past week. The weakness in the US dollar has been a factor in rising commodity prices, but the corresponding expectations of improving global markets and thus increasing demand is behind the price moves. West Texas Intermediate (WTI) oil gained $3.44 (4.15%) this past week to close Friday at $86.42 per barrel. Gold gained $35.20 (2.15%) per ounce for a Friday close at $1671.00. Following the muddled trend found in the major US economic sectors area, there has been no sector other than oil, which has clearly separated itself as a leader among other commodity sectors recently. For the year, the Dow Jones UBS Commodity Index is down 8.73%. Gold and Precious Metals are the clear leaders so far in 2011 with Natural Gas and Base or Industrial Metals (i.e. Nickel, Copper, Lead) the laggards.

Bond markets pulled back for the third consecutive week as US Treasury interest rates continued to rise pushing down bond valuations. The 10-year interest rate increased from 2.08% a week earlier to close Friday at 2.25%. The 30-year rate also increased from 3.02% to 3.24%. High yield, Emerging market sovereign debt, and preferred bonds were the best performing sectors within the fixed-income asset category while extended maturity bonds (greater than 20 years) were the worst performers again. The Barclay's Aggregate US Bond Index closed down 0.19% last week but remains up 5.81% for the year. Investors are moving money away from the safe-haven of US Treasuries and into more risky bond sectors in search of better yields.

FAILURE IS NOT AN OPTION

A very guarded sense of optimism emerged from this past weekend's meeting of the G-20 Finance Ministers in Paris. The Germans and French stated that they were making progress towards their plan to deal with Greece and get the debt crisis under control. According to the Wall Street Journal, the plan has three legs: a new bailout for Greece, bank recapitalization, and an increase in the European Financial Stability Fund (EFSF). The Europeans will be meeting on October 23rd to finalize the details of the plan which is expected to be presented to the next meeting of the G-20 on November 3rd in Cannes, France. Markets have moved up sharply in response to this renewed optimism.

However, there are still many details to work out in the next week. The Financial Times reported late Friday that the representative of the largest private owners group of Greek debt, the Institute of International Finance (IIF), stated that his organization was unwilling to take a larger loss than the previously negotiated loss of 21% (German Chancellor Merkel is looking for a voluntary loss of between 50% and 60%). You may question why the IIF should have any say in how much of a loss they are willing to take, but the answer is simple and important: if the current private bond owners agree to a negotiated settlement, it would not constitute a technical default on the bonds. If a technical default were to occur it would trigger insurance policies, payouts, and a massive loss of confidence in European credit markets and immediately create problems for Spain and Italy. The markets would be dictating outcomes, not politicians and central bankers.

Another detail to be worked out is how banks are to be recapitalized. The Germans want each country to deal with their own banks. The French want to use ESFS funds because of concerns that increased French borrowing would jeopardize their highly coveted AAA debt rating.

I would fully expect negotiations to grow increasingly contentious as the pressure to meet very public deadlines approaches, and because this may very well be the last chance European leaders have to prove to the private markets that they can come up with comprehensive policies to deal with Greece. I would sum up the situation with a quote from one of my all-time favorite movies, Apollo 13, "Failure is NOT an option."

LOOKING AHEAD

The rally in markets here and abroad has caused several key indicators I follow to change to the positive. First, the New York Stock Exchange Bullish Percent (NYSEBP) reversed from a column of O's (selling in control) to a column of X's (buying in control), and the NYSEBP has increased from a low of 17.47% on October 4th to a close on Friday of 40.00% posting a weekly gain of nearly 17%. Second, the US stock and International stock asset categories now pass the Cash bogey check indicating that the relative strength of US and International stocks is improving. US stocks and International Stocks are still in third and last place among my five major asset classes, so I am not suggesting a full move back into either asset class, but I will be looking to selectively increase stock exposure this week primarily in US stocks.

Currencies and Commodities still remain as the top two major asset categories on a relative strength basis. The Chinese Yuan and Japanese Yen are favored in the Currency category while the agriculture and precious metals sectors are favored within the Commodity category.

In the US stock category, mid-capitalization growth stocks are favored. On a relative strength basis, Consumer Staples, Consumer Discretionary, and Utilities are the strongest sectors while Financials, Industrials, and Materials remain the weakest.

US bonds continue to come under pressure as interest rates continue rising from their historically low yields. The higher risk bonds (high yield, preferreds, and bank loans) have rallied along with the stock markets while longer maturity bonds have seen significant pullback. The International bond sector extended its rally last week on expectations that Europe is getting its act together on the Greece debt crisis. I do not recommend selling bond holdings and favor inflation protected bonds and international bonds at this time.

I continue to like gold. Investors see gold as an important hedge against paper currencies that may be exploited by central banks to help get their debt problems under control.

Among the key economic data being reported next week is the Industrial Production (Monday, the Producer Price Index (Tuesday), the Consumer Price Index and Housing Starts (Wednesday), and Jobless Claims and Existing Home Sales (Thursday). As has been the case over the past several months, investors are watching the data closely for signs of economic direction and strength.

Attention will continue to focus on Europe and the progress of political leaders to shape economic policy rather than losing control to the bond markets. Spanish and Italian bond yields will be an important indicator of investor views of the success or failure of politicians. Time is running out. The moment for action is now.

The NYCE US Dollar Index is a measure that calculates the value of the US dollar through a basket of six currencies, the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swedish Krona, and the Swiss franc. The Euro is the predominant currency making up about 57% of the basket.

Currencies and futures generallyare volatile and are not suitable for all investors. Investment in foreign exchange related products is subject to many factors that contribute to or increase volatility, such as national debt levels and trade deficits, changes in domestic and foreign interest rates, and investors' expectations concerning interest rates, currency exchange rates and global or regional political, economic or fi nancial events and situations.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. 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, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. 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. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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US and global markets managed to rally this past week on less bad US economic news and speculation that Europe may be considering a plan to recapitalize European banks.

The Dow Jones Industrial Average (DJIA) gained 1.74% (190 points) last week while the S&P 500 gained 2.12% and the Russell 2000 ticked up 1.87%. US markets rallied Friday morning after the September jobs report showed a net increase of 103,000 jobs when an increase of 65,000 was anticipated. The unemployment rate of 9.1% remained unchanged reinforcing worries that the US economy will continue to lag for some time. For the year, the DJIA is now down 4.10%, the S&P 500 is off 8.12%, and the Russell 2000 is down 16.26%.

Seven of the eleven major economic sectors were positive for the week led by Materials, Consumer Discretionary and Industrials, while Real Estate, Telecom, and Utilities performed the worst. Traditionally defensive sectors, Utilities, Consumer Staples, and Health Care remain the only positive sectors for 2011. Financials, Materials, Industrials, and Energy are down more than double digits and are currently underperforming the DJIA and S&P 500.

The MSCI EAFE gained 2.00% and has now rebounded 5.22% in the past two weeks driven by investor optimism that European leaders were looking at a coordinated plan to recapitalize the region's banks. Additionally, the European Central Bank (ECB) announced that it would continue to provide unlimited funds for European banks by purchasing certain categories of bonds for the next year. The move is viewed as a way to give the political leaders more time to make banks healthier in the event of a Greek bankruptcy. For the year, the MSCI EAFE is now down 15.52%.

The Euro remained essentially unchanged against the US dollar last week but continued a six-week pullback against the Japanese Yen. The ECB's decision to hold interest rates at 1.5% helped maintain the Euro's strength to the US dollar. For the year, the Euro has given back all its gains against the US dollar and closed the week at $1.3380 compared to opening 2011 at $1.3369.

Commodities in general rallied over the past week on the "less bad" economic data coming out of the US. The Dow Jones UBS Commodity Index, a broad basket commodity index, gained 1.21% helped primarily by the 4.8% increase in WTI crude oil. Oil is particularly sensitive to perceived global supply and demand adjustments and with the improved jobs report in the US, traders raised their bets on oil. Base metals, those used primarily in manufacturing such as copper, tin, and nickel, were the best performing commodities last week. This is consistent with the strong weekly performance in the Materials sector. Natural gas and platinum were the worst performers. Gold also gained $13.50 per ounce (0.83%) as investors shifted money away from US Treasuries and into gold. WTI oil is now down 9.03% for the year and gold is up 15.22%.

Bond markets pulled back for the second consecutive week as US Treasury interest rates continued to rise pushing down bond valuations. The 10-year interest rate increased from 1.91% a week earlier to close Friday at 2.08%. The 30-year rate also increased from 2.91% to 3.02%. Emerging market sovereign debt, high yield, and inflation protection notes were the best performing sectors within the fixed-income asset category while extended maturity bonds (greater than 20 years) were the worst performers. The Barclay's Aggregate US Bond Index closed down 0.63% last week but remains up 6.40% for the year. It is too early to tell if the two-week pull back in bonds is the start of a longer-term trend or just a brief aberration. It does warrant on-going monitoring.

DOES EUROPE FINALLY GET IT?

German Chancellor Merkel stated last Wednesday that Germany supported the recapitalization of banks if the situation warranted. While it remains to be seen if other leaders support her, it does mark a critical shift in the conversation among European leaders. It is also important to keep in mind that most European banks have substantial holdings in the debt from many countries, not just Greece...making debt stability in the Euro Zone such a vital issue.

Implied within her remarks is a tacit admission that Greece is likely to default on its sovereign debt-a view already reached by the private sector and confirmed by the ratings agencies. By acknowledging that Greece is unlikely to repay its debt, it may be possible for European leaders to take the first step in dealing with this crucial problem. Protecting banks is essential, but ultimately the EU must deal with member countries that are not growing fast enough to keep up with their spending. The English edition of Der Spiegel has an outstanding series of articles titled "What Options Are Left for the Common Currency?" that deals with this problem in depth: http://www.spiegel.de/international/europe.

I readily admit that a discussion of bank capitalization is a bit dull and technical, but I ask for your patience as I spend a few moments to review this important concept and explain the ramifications this has on the economy.

Banks are required by regulators to keep sufficient reserves on hand to deal with "unexpected" circumstances. Think of it like your own "emergency fund" that most households maintain in a savings account. Determining the appropriate size of the reserve is critical because funds held in the bank are not available for purchases in the case of households or lending in the case of banks. Regulators must set standards that ensure there is enough capital to keep banks solvent without hindering economic activity across a country or globally. Set aside too much cash and a recession can occur.

Most countries adhere to the capital requirements established by the Bank for International Settlements (BIS) located in Basel, Switzerland. Central bankers, like Fed Chairman Bernanke, work with the BIS to set guidelines

on banking that are subsequently adopted by individual countries. The capital requirement for a bank (and I am greatly simplifying) is determined by a complex formula that assigns various risk weightings for the types of assets owned by a typical bank. For example, cash and sovereign debt have a risk weighting of zero meaning that a bank does not need to set aside funds for these "riskless" assets while other loans may require reserves of up to 100% of the face value of the loan.

What makes the current situation in Europe so challenging is determining the appropriate risk weighting assigned to sovereign debt, especially the debt for Greece, Portugal, Spain, and Italy. Without an adjustment to reflect the growing risk of default in all of these countries, banks remain undercapitalized and therefore vulnerable to default by any of these countries. Assign too much risk and you increase the likelihood of recession. Chancellor Merkel's comments about bank capitalization will be meaningful only if coupled with a clear analysis of how much risk individual banks have by holding sovereign debt and a consensus by the EU members to provide assets to the banks to increase capitalization. By comparison, in 2008 US banks were initially supported by the Federal Reserve and have since raised capital through private investors (most recent example of this was Warren Buffett's $5 billion investment in Bank of America). This is exactly how Europe should proceed.

Europe faces additional risks because of the slow pace it takes to reach agreement on anything. If the private markets lose faith faster than European leaders can act, the situation could rapidly spin out of control bringing down many banks and pushing the world into a second major recession. The downgrade of Spain and Italy by Fitch Ratings on Friday will increase the pressure of European leaders to act quickly. I make no prediction about how this will unfold and anyone who does is merely speculating, but I am encouraged by this change in dialogue.

LOOKING AHEAD

After the sell-off in equity markets last Monday, October 3rd, US stocks fell from the number one asset category to the third. Foreign currencies moved to first followed by Commodities in second. Fixed-income remains fourth and International stocks remain firmly in fifth and last place. Within the foreign currency asset category, the Japanese Yen, Chinese Yuan, and US dollar are favored.

Even though the major US indexes all rose last week, the New York Stock Exchange Bullish Percent (NYSEBP) fell again from 23.98 to 23.09 with supply (selling) in control. The NYSEBP violated the August 8th low of 21.38 on October 4th reaching 17.47 before rallying to its current level. The NYSEBP indicates how washed out this market currently is and that a lot of risk has been removed. However, risk remains and with US stocks falling to the third of five asset categories and failing the cash bogey check, it would be premature to increase allocations into US stocks for all but the most aggressive investors.

I continue to recommend significantly underweighting international stocks, and I am not adding to my commodity allocations at this time.

Within the US stock category, mid-capitalization growth stocks are favored. On a relative strength basis, Consumer Staples, Utilities, and Consumer Discretionary are the strongest sectors while Financials, Industrials, and Materials are the weakest.

US bonds have come under pressure but most bond sectors remain positive year-to-date. International bonds rallied last week with the news coming from Europe. I do not recommend selling bond holdings and favor inflation protected bonds and international bonds at this time.

I continue to like gold. The recent selloff has come more from investors seeking profits rather than a reduction in the uncertainty factor in markets.

US markets are closed on Monday in observance of Columbus Day. The key economic events for the week will be the release of the Fed's Open Market Committee meeting notes on Wednesday afternoon, the regular initial jobless claims announcement on Thursday morning, and Retail Sales on Friday morning.

All eyes will continue to be on Europe. Will other European leaders endorse Merkel's call for recapitalization and if so, what plan will emerge for funding banks. The market's patience may come to a swift end if nothing substantive is undertaken.

The NYCE US Dollar Index is a measure that calculates the value of the US dollar through a basket of six currencies, the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swedish Krona, and the Swiss franc. The Euro is the predominant currency making up about 57% of the basket.

Currencies and futures generallyare volatile and are not suitable for all investors. Investment in foreign exchange related products is subject to many factors that contribute to or increase volatility, such as national debt levels and trade deficits, changes in domestic and foreign interest rates, and investors' expectations concerning interest rates, currency exchange rates and global or regional political, economic or fi nancial events and situations.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. 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, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. 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. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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With the third quarter now in the books, investors are looking back over the carnage of the financial markets' performance and asking questions about what lays ahead.

The Dow Jones Industrial Average (DJIA) managed a 1.3% gain (142 points) for the last week of September, but this did little to offset the losses of the quarter. For the 3rd quarter the DJIA lost 12.1%, the S&P 500 lost 14.3%, and the Russell 2000 gave back 22.2%. Worry over the European Union's debt crisis has been the dominant concern for investors followed closely by a US economy that seems to be unable to get out of neutral. For the year, the DJIA is now down 5.7%, the S&P 500 has lost 10.0%, and the Russell 2000 is off 17.8%.

Among the major economic sectors, all eleven were down during the 3rd quarter. The top sector, Utilities, was down just under 1% and is still up over 6% for the year. Investors have turned to this traditionally defensive, and dividend paying sector more and more as interest rates paid by bonds has fallen to record lows. Consumer Staples and Health Care are the only other sectors that remain positive year-to-date. Financials, Materials, and Industrials are the worst performing sectors for both the 3rd quarter and for the year.

Europe rebounded a bit last week on the news that the German parliament had passed legislation authorizing the expansion of the European Financial Stability Facility (EFSF) from €250 billion ($335 billion) to €440 billion ($590 billion) and Germany's obligation from €123 billion to €211 billion. The successful vote was considered an important indication of the strength of Chancellor Merkel's coalition, but comes with a number of restraints designed to limit the Chancellor's discretion in further negotiations. For the week, the MSCI EAFE index gained 3.15% marking the second best weekly performance in 2011. However, this broad international index was down 19.6% for the 3rd quarter and is now down 17.2% for the year.

The Euro fell slightly against the US dollar last week losing 1 cent (-0.74%) to close at $1.340. Eurostat, the European Union's (EU) official statistical agency reported that inflation for the trailing 12-months surged to 3% in September. Given the European Central Bank's (ECB) mandate to keep inflation at 2% or less, the natural expectation would be for the ECB to raise interest rates (helping to strengthen the Euro), but currency investors believe the ECB will not do so for now because of the debt crisis and slowing markets. The Euro gave back 11 cents (-7.6%) to the US dollar during the 3rd quarter and is now up less than 1 cent for the year. The US dollar continues to gain in strength as international investors seek out the safety of US Treasuries (international investors must sell their foreign currencies to purchase US dollars to buy US Treasuries).

The pace of price decline in precious metals slowed dramatically this past week, but still fell nonetheless. Gold lost $38.40 (-2.3%) per ounce to close the week at $1622.30. Even with the turbulence of the past month (-11.3%) gold remains up 8.0% for the 3rd quarter and 14.3% for the year. There is no indication that gold has lost its importance as an uncertainty hedge, but profit taking and margin calls have contributed to the recent selloff. Oil's decline also slowed dramatically last week with the price of a barrel of West Texas Intermediate (WTI) losing $0.79 (-0.99%) to close at $79.20. For the past quarter, WTI fell 10.8% and is now down 13.8% for the year. The UBS Commodity index, a broad basket commodity index, fell 2.1% for the week under a growing consensus that the global economy is slowing to a crawl causing a reduction for the overall demand of commodities (a strengthening US dollar also hurts the price of commodities). Livestock and Sugar were the two best-performing commodity categories while Grains and Copper were the worst. For the quarter, the UBS Commodity Index was down 14.8%, and for the year, it is down 13.7%.

Bond markets were flat to down last week as US Treasuries pulled back slightly pushing up interest rates marginally. The 10-year US Treasury yield rose from the previous week's close of 1.826% to 1.912%. I believe that the markets are trying to digest the full impact of Operation Twist-the Federal Reserve's plan to sell short maturity US Treasuries (3 year maturities and less) to buy long maturity US Treasuries (6 years or longer maturities). Corporate High Yield bonds and International Emerging Market debt were the worst performing bond sectors last week while High Yield Municipals and Long Duration US Treasuries were the best. The Barclay's Aggregate U.S. Bond Index closed the week down -0.44% and is now up 7.08% for the year.

STAGNANT GROWTH WITH VOLATILITY

The common theme I continue to hear from top investment minds in the country like Bob Doll of BlackRock and PIMCO's Mohamed El-Arian, is the suggestion that most major economies will be mired in sluggish growth for the next few years. I believe these men are correct. Saying this does not make me feel good, but I was once told by an attorney, "you pay me to tell you what you need to know, not what you want to hear."

Therefore, this less than rosy reality is where we are.

I am not suggesting that the sky is falling and that there are not opportunities for investors, but I am suggesting that patience and discretion will be necessary for successful outcomes. Returns are likely to be hard earned and may come from places that have do not appear obvious now. This is why I find the research provided by Dorsey Wright & Associates so valuable, and which will continue to help guide my investment recommendations.

The recent volatility in the markets emphasizes my thesis. European markets had a strong week, but they did so within the context of the hope that European leaders were heading towards a successful solution to the problems of Greece and the associated risks to the banking system. But is the expansion of the bailout fund really a long-term solution? Or is it yet another short-term band-aid for the deeply rooted problems found in a government that has spent more than it could afford for years? We have seen markets rise on such hope before only to be disappointed a short time later as reality once again sets in.

So be patient and be smart about your investment decisions. There will be good opportunities in the future.

LOOKING AHEAD

There have been no changes in any of the major indicators I follow. The New York Stock Exchange Bullish Percent (NYSEBP) fell slightly to 23.98 with supply (selling) in control. August 8th marked the low point for the NYSEBP at 21.38, and I would like to see this important indicator remain above that August low.

US stocks and Commodities remain the top two rated major asset categories, however they fail the cash bogy check indicating that these investments should be underweighted. I have become concerned about the deteriorating trend in the Commodity category and will review these holdings very carefully. International stocks still rank last and significantly trail the other asset categories and should be significantly underweighted.

Within US equities, mid capitalization stocks are still the strongest on a relative strength basis. I believe that high quality; large capitalization dividend paying stocks present a compelling story and appear to be showing relative strength as a defensive investment. I believe some of this strength is a result of dividend yields on many of these stocks exceeding the current yields on the 10-year and 30-year US Treasury notes. However, until the relative strength of stocks in general improves, I would be cautious about adding significant positions to any stock or equity investment at this time.

I continue to like gold. The recent selloff has come more from investors seeking profits rather than a reduction in the uncertainty factor in markets. Clearly uncertainty remains firmly in place.

Within the bond asset category, International Bonds and Inflation Protected Bonds continue to be favored.

There are three significant US economic reports due out this week. On Monday, the ISM manufacturing survey will be released. Consensus is for a very slight drop to 50.5 from 50.6. Any number above 50 shows expansion while below 50 indicates contraction. Thursday will see the weekly release of the initial jobless claims data. Consensus is for an increase up to 410,000 in new unemployment applications. The September employment report will be released on Friday. Consensus is for a net increase of 65,000 jobs and a jump in the overall unemployment rate to 9.2% from the current 9.1%.

Patience is paramount for now.

The NYCE US Dollar Index is a measure that calculates the value of the US dollar through a basket of six currencies, the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the Swedish Krona, and the Swiss franc. The Euro is the predominant currency making up about 57% of the basket.

Currencies and futures generallyare volatile and are not suitable for all investors. Investment in foreign exchange related products is subject to many factors that contribute to or increase volatility, such as national debt levels and trade deficits, changes in domestic and foreign interest rates, and investors' expectations concerning interest rates, currency exchange rates and global or regional political, economic or fi nancial events and situations.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. 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, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. 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. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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