Wednesday, March 28, 2012

Most major stock indices posted their year-worst weekly returns for 2012 on generally blah economic reports. Here in the US, new home sales for February fell a disappointing 1.6% from January to a seasonally adjusted rate of 313,000 units annually. Also troublesome was news that Chinese manufacturing and its broader economy were slowing. The week reminded
investors that economic recoveries, especially weak recoveries, are anything but a smooth ride to higher stock values.

For the week, the Dow Jones Industrial Average (DJIA) lost 152 points (-1.15%), the S&P 500 fell 7 points (-0.50%), and the Russell 2000 was flat losing just 0.02% for the week. The tech-heavy NASDAQ index was a notable exception gaining 0.41% for the week lifting this index to a 17.76% gain for 2012. By comparison, the DJIA is up 7.06% for the year, the S&P 500 is up 11.09%, and the Russell 2000 is up 12.03% so far in 2012. After 12 weeks of trading in 2012 the NASDAQ has only one down week (week 6, -0.06%), the DJIA has five down weeks, the S&P 500 only two, and the Russell 2000 has four.

Three major economic sectors posted gains last week: Consumer Discretionary, Consumer Staples, and Information Technology. Financials were flat, while Energy, Industrials, and Materials were the bottom three performers. For the year, the top performers continue to be Information Technology, Financials and Consumer Discretionary. Utilities, Consumer Staples, and Energy are the bottom three with only Utilities in negative territory down a little more than 3%.

International stocks continued their recent struggle especially the Asian/Pacific region and Emerging Markets. The broad, European-centric MSCI EAFE index fell 1.53% for the week while the Asia/Pacific region posted a 1.21% decline and Emerging Markets in general lost 2.57%. The Emerging Market sector within the international category remains up a strong 13.68% for the year despite being down over 4% so far in March. News of economic contraction in China is driving the pullback in that important sector and region of the world.

The Dow Jones UBS Commodity index posted a decline of 1.48% matching most equity indexes for the worst weekly performance in 2012. Gold managed a small improvement adding $6.60 (0.40%) to the price of an ounce of gold closing Friday at $1662.40. Analysts generally attributed the slight rise in gold prices to a declining US dollar and falling interest rates. WTI Oil fell slightly (-0.18%) to close the week at $106.87 masking a sharp run-up on Friday as news entered the market that Iranian oil exports have fallen recently. This news offset the general downward pressure on oil prices caused by a weakening US dollar and indicates that the fear-factor of an unstable Middle East is keeping oil prices extended. Cotton and Cocoa were the best performing commodities that I track while the highly volatile Natural Gas sector fell over 20% for the week. Other poorly performing commodity sectors last week include base metals (i.e. lead, tin, and nickel) and platinum. For the year, Natural Gas, Gasoline, and Platinum are the best performing commodity sectors while Coffee, Cotton, and Livestock are the worst.

The US dollar continued to lose ground last week falling a penny (-0.76%) against the Euro and the US Dollar Index fell 0.55% for the week. The drop can be attributed to the generally lackluster economic data from the housing market last week raising doubts about the overall strength of the US economy and recovery. Currencies in general have been a fairly subdued asset category for the year with the Euro up 2.55% and the Yen up 7.03% against the US dollar.

Bond markets were flat for the week with the Barclays Aggregate US Bond Index up just 0.1% for the week. US 10-year and 30-year Treasury yields fell for the first time in four weeks giving a boost to longer-duration bonds. The 10-year Treasury closed Friday at 2.234% down from the previous week’s close of 2.294%. German and French 10-year treasuries also fell for the week while Spanish and Italian 10-year debt jumped sharply. I believe the yield movements coming in from the key sovereigns around the world is troublesome. Drops in yields generally indicate a lack of confidence in economic growth while sudden jumps like those seen in Italy and Spain show a general worry about confidence in those countries. These trends must be followed closely. For the year preferreds, international inflation, and high-yield have been the best performing bond sectors while extended US Treasuries and corporate bonds have been the weakest.

FOLLOW ON TO LAST WEEK’S OBSERVATIONS

Last week I reviewed some general observations from the experts from First Trust Advisors and their generally bullish outlook on the US economy. I share their views that America is and will remain the leader of the world economically. I also believe that the business of America is business and that the more Americans are allowed to go about their daily lives unfettered by excessive interference the greater our success will be. That does not mean forsaking those less fortunate and unable to help themselves, we must strive to help those people—but we cannot shut down the economic engine that has made this country the greatest to ever exist in the history of the human race.

I have given much thought about the economic/jobs transition taking place in the US and abroad. The world is dramatically different then it was even a few decades ago. Technology has drawn all economies closer together and advanced transportation systems allow goods to travel freely around the world. Industries such as steel and agricultural production, which were once focused wholly on domestic consumption, are now international in scope. Capital investment has been able to seek out its most productive use. Looking at statistics from the Bureau of Labor Statistics and the United Nations, the average US worker is 3 times more productive than he was in 1972, and the US leads all other nations in industrial output. In 2009 the US manufacturing output was equivalent to the output of the 3rd through 17th ranked countries combined! (Source: United Nations, “The Demise of American’s Manufacturing Sector Has Been Greatly Exaggerated,” by Mark Perry, the EnterpriseBlog, January 20, 2011). The jobs market today looks dramatically different from the jobs market of the 1960’s or 1970’s, and education is becoming a critical asset for American workers using the most sophisticated manufacturing processes here at home.

My belief is the employment challenges facing our government leaders may be tougher than they realize. Transitions are never easy and frequently unrecognized until well into the process. The days of a semi-educated worker finding a well paying job to support a family are becoming fewer and fewer. A premium will be paid for those workers who can handle sophisticated manufacturing techniques and those who cannot will be pushed further to the economic edge of society. The government must focus more

of its efforts and resources towards the effective education of Americans—especially to the very young, so every American can find meaningful and well-paying jobs. This is the challenge facing all of us, but one I believe we can meet. America will continue to be the most productive and innovative country in the world.

Speaking of transitions, I would like to take a brief moment to recognize a good friend, Capt. Alan Oshirak, of the United States Navy who retired this past Friday following 30 years of truly exceptional service to our great Nation. Alan and his family have carried the burden of sacrifice that is associated with a soldier and sailor’s life—frequent separations, extremely hazardous duties, and an unknown future--with great strength and humility. I want to publically thank Alan for his service and wish him continued success going forward.

LOOKING AHEAD

The past week showed that the US economy is still on some shaky ground. The US housing market is not as strong as hoped and is holding back parts of the economy. The employment numbers are improving but not in the quantity that would indicated a strong, sustained, and improving recovery. However, the data is still ok and growth is still occurring. I remain concerned about high oil prices and the effect these prices will have on the average family. Additionally, I am watching interest rates, both here and abroad, very closely. I think interest rates are an important indicator to how investors view the markets today and tomorrow. There have been no major changes to the relative strength analysis from Dorsey Wright (DWA). US stocks remains the strongest asset category followed by Commodities, Bonds, International stocks, and Currencies. US stocks retain a very sizeable lead over the other categories with the others clustered closely together. The International stocks category remains the most improved by overall score change so far in 2012.

Within the US stock category, DWA analysis ranks mid-capitalization stocks above large and small capitalization stocks. Growth stocks are favored over value stocks, and equal-weighted indexes are favored over capitalization-weighted indexes by DWA. I believe that it is important to pay attention to the major economic sectors when investing. DWA currently ranks the sectors on a relative strength basis as follows (starting with the strongest): Consumer Discretionary, Information Technology, Financials, Real Estate, Health, Energy, Consumer Staples, Materials, Industrials, Telecom, and Utilities. Investors seeking higher dividend income generally own the Utilities and Telecom sectors and these sectors are currently providing that income.

Within the Commodity asset category, Energy and Precious Metals are the favored sectors. The current weakness of gold and silver may cause a change in this current ranking; however, it is too early to tell. Treasuries and International Inflation Protection Notes are the favored sectors within the bond category; however, I believe the recent rise in interest rates is likely to challenge the relative strength leadership of Treasuries going forward. In terms of performance, preferreds, high-yield, and floating-rate bonds have been leading many other bond sectors as investors appear willing to take on more risk in order to get more yield. Rising interest rates must be watched carefully because bond values will fall correspondingly. The newly promoted International stock asset category places the Developed Market sector on top with emphasis on the US. Outside of the US, the Emerging Market sector has shown the best performance in 2012. Finally, within the Currency category, DWA places the Australian dollar, the Brazilian Real, and the South African Rand as the top relative strength currencies.

Economic reports being released this week will cover a variety of data points. The highlights include Consumer Confidence on Tuesday, Durable Goods Orders on Wednesday, the final revision of the 4th Quarter, 2011 Gross Domestic Product on Thursday along with initial jobless claims, and Personal Income and Outlays on Friday. A review of consensus expectations of the data shows expectations to be relatively flat for most of the data--no expected surprises on the upside or downside. The one exception is with the data due to be released on Friday covering personal income and spending. Both income and spending is expected to rally strongly for February and is an important barometer of sustained economic growth.

Sincerely,

Paul L. Merritt, MBA, AIF®, CRPC® Principal NTrust Wealth Management

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

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.

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. 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.

TIPS are U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation. Increase in real interest rates can cause the price of inflation-protected debt securities to decrease. Interest payments on inflation-protected debt securities can be unpredictable.

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 generally are 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 financial 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.

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 and is a capitalization-weighted index meaning the larger companies have a larger weighting of the index. The S&P 500 Equal Weighted Index is determined by giving each company in the index an equal weighting to each of the 500 companies that comprise 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 Russell 2000 Index Is comprised of the 2000 smallest companies of the Russell 3000 Index, which is comprised of the 3000 biggest companies in the US. The NASDAQ Composite Index (NASDAQ) is an index representing the securities traded on the NASDAQ stock market and is comprised of over 3000 issues. It has a heavy bias towards technology and growth stocks.

Thursday, March 22, 2012

After four or five weeks of generally flat performance, US stocks posted their strongest gains yet in 2012 on encouraging economic reports regarding jobs, retail, and manufacturing. Only a somewhat negative report on consumer confidence on Friday took some steam out of the markets this week.

For the week, the Dow Jones Industrial Average (DJIA) gained 311 points (2.40%), the S&P 500 gained 38 points (2.43%), and the tech-heavy NASDAQ added 13 points (2.24%). The Russell 2000 slightly lagged the other key indexes gaining 1.61% for the week. For the year the DJIA is up 8.31%, the S&P 500 is up 11.65%, the Russell 2000 is up 12.05%, and the NASDAQ is up an impressive 17.58%.

Financials, Industrials, Real Estate, and Information Technology all outperformed the S&P 500 this past week with Financials leading all sectors with a 5% gain. Banks have been especially strong following the Federal Reserve's release of findings from rigorous stress tests designed to identify potential weaknesses among the major banks. Most banks did well and this has boosted the confidence of investors in this beaten down economic sector. The more defensive sectors like Telecom and Utilities have struggled so far in 2012 as investors have moved into the more cyclical economic sectors like Financials, Materials, and Industrials. For the year Information Technology, Financials, and Consumer Discretionary are the best performing sectors while Utilities, Consumer Staples, and Telecom are the worst. However, only the Utilities sector is down slightly at this point in 2012.

International stock indexes posted good, but more modest returns for the week with the European-heavy MSCI EAFE index gaining 0.85%. The Americas and Developed Markets were the best performing broad sectors within the International category while Emerging Markets and Asia/Pacific lagged. Germany, the Netherlands, and Sweden were the best performing countries of those I follow last week while Egypt, Malaysia, and India were the worst. For the year Emerging Markets is the best performing of the broad International sectors with Asia/Pacific, Developed Markets, and the Americas sectors closely bunched together and posting nice gains. Spain and Indonesia are lagging most International country performances with low single-digit gains.

The Dow Jones UBS Commodity index gained 0.57% ending a two-week slide, however, gold continued its fall with another 3.25% drop and WTI oil fell a slight 0.32%. Natural gas again posted strong gains to lead most commodity sectors along with gains in Sugar, Grains, and Agriculture. Cocoa and Precious Metals led among commodity sectors that were down for the week. Gold prices failed to rally on a weaker US dollar after the Wall Street Journal reported that the Indian Finance Minister proposed a doubling of import tariffs on gold for that country. India is the largest buyer of gold in the world and any reduction of demand there would be expected to hurt gold prices in general. Although oil prices ended the week basically flat, oil sold off Thursday after a news story said the US and Great Britain had agreed to a release of oil from the Strategic Petroleum Reserve to help off-set rising gasoline prices. This report turned out to be incorrect and oil prices rebounded on Friday to close at $107.06 per barrel.

The US dollar reversed course last week and posted its first negative return of the past three weeks. The US dollar fell even as interest rates on longer-maturity US Treasuries surged and the US economic outlook continues to improve. For the year, the US dollar is flat (the US dollar index is down 0.49%) against most major currencies. The one exception is the Japanese Yen which is up 8.32% against the US dollar. I have said before that I rarely trade in currencies, but I certainly pay attention to the general strength/weakness of the US dollar because of the important ramifications it has on stock and bond valuations.

Bond markets saw sizeable sell-offs of US Treasuries last week as the 10-year and 30-year notes saw their yields reach levels not seen since the end of October 2011. The US 10-year closed Friday at 2.294% and the US 30-year closed at 3.407%. The Barclays Aggregate US Bond index fell 0.73% last week to post the worst one-week return in over a year. I believe the move away from bonds can be attributed to the overall outlook for the US economy, reduced expectations that the Federal Reserve will rollout another round of quantitative easing, and increasing investor appetite for risk. The interest rate on the German 10-year Bund also rose sharply. Not surprisingly, long-duration US Treasuries and Corporates were the worst performing bond sectors last week and are also the worst performing for the year. Preferreds, floating-rates, and short-duration bonds were the best performing bond sectors last week. Overall, the Barclays Aggregate US Bond index is down 0.04% for the year.

SOME GENERAL THOUGHTS

I would like to begin this section of my Weekly Update saying how nice it is to be talking about something other than Europe. I do not apologize for the time I have spent addressing the issues in Europe because I believe their challenges do and will impact us here in the US both in immediate economic terms but also as a preview of what could happen here in the US if the federal government continues to spend far outside its means. But for now I happily discuss some other topics.

I spent this past Friday attending a seminar hosted by First Trust Advisors in Chicago. The speakers offered a variety of thoughts about the US and global economy and I would like to share some of their views. Before I begin let me say that I am not endorsing any specific opinion and forward-looking statements are subject to change at any time:

Overall thesis: the US economy is the most resilient in the world. US workers and corporations go about each day trying to be better and strive for economic prosperity. This effort translates into long-term growth that can overcome the headwinds found by excessive government spending, above average unemployment, and challenges from abroad.

Inflation: is present but not of the magnitude to cause immediate concern. The Federal Reserve will be forced to raise interest rates next year, but this is a good thing because it indicates a strengthening economy here at home. Fears that the increase in the money supply generated by the Fed's quantitative easing programs would lead to high inflation has not materialized because banks have taken much of the money created by the Fed and put it right back on deposit with the Fed. The overall circulation of money is not growing at the same rate as money creation keeping inflation in check for now.

Volatility: the strong start to the markets in 2012 has helped reduce volatility by driving many of the short-sellers (those who borrow stock, sell that stock in anticipation of a decline, and purchase it back at a later date thereby profiting on the decline) out of the markets. Their absence has helped to limit many of the big swings seen during the last half of 2011.

Europe: is not a banking problem but a government problem. Governments throughout Europe have been fostering an unsustainable "lifestyle" and we are now witnessing the end of the European welfare state. It will take years to play out, but the pendulum has begun to swing back towards less government spending. Governments will have no choice but to curb spending because the capital markets simply will not continue to lend money to profligate countries as they have done over the past 50 years.

Technology: the pace of technological innovation will continue to grow at an ever-increasing pace. New inventions result in even more inventions. The US is the world's leader in technological research and innovation. Not surprising then, the US also leads the world in highly skilled manufacturing capabilities and our workers are the most productive anywhere. This global leadership will continue to grow over the decades to come.

Demographics: pay attention to this important factor. The work forces of Japan, China, Korea, and Western Europe will be noticeably smaller by 2050 than they were at the start of this century. India and the US by contrast will grow substantially.

LOOKING AHEAD

Following the strong performance of US equity markets this past week, it will be interesting to see if markets will maintain that momentum. Economic data indicates that the US economy is stronger than expected (or it is less bad than expected), and may hold current gains. However, I believe that investors must carefully monitor their investments for any signs of weakness. Thus the technical indicators I follow from Dorsey Wright & Associates (DWA) help to identify early trends or confirm existing ones.

The relative strength analysis from DWA ranks five major asset categories from strongest to weakest. As of the date of this Update US stocks is the strongest category followed by Commodities, Bonds, International stocks, and Currencies. The International stocks category advanced out of the bottom position early last week and moved to fourth. The International stocks category has also shown the most improvement of any category in 2012. US stocks retain a very sizeable lead over the other categories with the bottom four clustered closely together.

Within the US stock category, DWA analysis ranks mid-capitalization stocks above large and small capitalization stocks. Growth stocks are favored over value stocks, and equal-weighted indexes are favored over capitalization-weighted indexes by DWA. I believe that it is important to pay attention to the major economic sectors when investing. DWA currently ranks the sectors on a relative strength basis as follows (starting with the strongest): Consumer Discretionary, Information Technology, Financials, Real Estate, Energy, Health, Materials, Consumer Staples, Industrials, Utilities, and Telecom. Investors seeking higher dividend income generally own the Utilities and Telecom sectors and these sectors are currently providing that income.

Within the Commodity asset category Energy and Precious Metals are the favored sectors. The current weakness of gold and silver may cause a change in this current ranking; however, it is too early to tell. Treasuries and International Inflation Protection Notes are the favored

sectors within the bond category; however, I believe the recent rise in interest rates is likely to challenge the relative strength leadership of Treasuries going forward. In terms of performance, preferreds, high-yield, and floating-rate bonds have been leading many other bond sectors as investors appear willing to take on more risk. Rising interest rates must be watched carefully because bond values will fall correspondingly. The newly promoted International stock asset category places the Developed Market sector on top with emphasis on the US. Outside of the US, the Emerging Market sector has shown the best performance in 2012. Finally, within the Currency category, DWA places the Australian dollar, the Brazilian Real, and the South African Rand as the top relative strength currencies.

Housing will be the focus of many economic reports coming from the Federal government this week. February Housing Starts will be released Tuesday morning. Consensus is looking for 700,000 new starts just slightly better than the 699,000 of the previous month. February Existing Home Sales will be released on Wednesday morning with consensus anticipating an increase of the annual sales rate from January's 4.57 million to 4.61 million. New Home Sales for February will be released on Friday morning. Consensus is expecting the annual rate to increase from January's level of 321,000 to an annualized rate of 325,000. Initial Jobless Claims will be published Thursday morning as it is every week. The consensus is anticipating a slight increase from 351,000 new claims so 352,000. Each of these reports is important to investors because they will confirm or challenge the assumptions by investors that the US economy is gaining strength.

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 financial events and situations.

Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, including international economic, political and regulatory developments.

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.

TIPS are U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation. Increase in real interest rates can cause the price of inflation-protected debt securities to decrease. Interest payments on inflation-protected debt securities can be unpredictable.

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.

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.

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.

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

Wednesday, March 14, 2012

The past week saw modest losses in US and International stocks, bonds, and commodities. The news from Greece continues to be the focus of nearly all investors, and while it appears that the Greece deal is finally done, the price paid by Greeks to secure the bailout funds may prove costly in the future. Other headlines during the past week included another positive jobs report here at home, China announcing that it had the largest monthly trade deficit since 2000, and that the US trade deficit reached its highest level in over three years with exports to China and Europe falling significantly.

For the week, the Dow Jones Industrial Average (DJIA) fell 55 points (-0.43%), the S&P 500 gave back just over a point (-0.09%), and the tech-heavy NASDAQ fell 12 points (-0.41). As has been the case recently the Russell 2000 index fell significantly more than the other major US indexes losing 1.82% for the week. The losses in the Russell 2000 were, however, about half of last week's losses. After ten weeks of trading in 2012 the DJIA is up 5.77%, the S&P 500 is up 09.01%, the Russell 2000 is up 10.27%, and the NASDAQ is up 14.71%.

Economic sector performance was led by the Telecom sector with a gain of just under 1.5% followed by the Consumer Discretionary and Utility

sectors. Only the Materials and Energy sectors failed to outperform the DJIA for the week. For the year Information Technology, Consumer Discretionary, Financials, Materials, and Industrials have all posted double-digit gains exceeding the DJIA handily. The Utilities sector remains the only negatively performing sector for the year down just over 2%.

International stock indexes, like US indexes, posted negative returns for the week with the European-heavy MSCI EAFE index losing another 1.11% following last week's loss of 0.78%. I believe that European investors are not convinced that Greece or the EU is out of harm's way with the successful (from Greece's and the EU's perspective) bond swap with private bondholders. Investors are also looking at shrinking European economies. In a story reported by the Wall Street Journal late last week, the European Central Bank (ECB) announced it was reducing the 2012 growth target for the EU from an already anemic 0.3% growth forecast to a "slight contraction." Even with this downward revision, the ECB held interest rates steady at 1% last week and did not suggest that it was likely to lower rates anytime soon. Within international sectors, the Americas Region was the best performer losing just under 0.1% for the week, and remains the best performing region in March. The emerging markets sector lost nearly 2% but remains the strongest sector for the year gaining over 16%. The MSCI EAFE index is up 9.32% for the year.

The Dow Jones UBS Commodity index fell for the second consecutive week losing 1.55% notching the worst one-week performance for this broad basket index in 2012. Gold (+0.10%), WTI oil (+0.66%), and Brent oil (1.88%) were notable exceptions. Gold has gained 9.24% for the year and some investors consider it a possible hedge against currency depreciation. Gold traders tend to focus on global economic strength and central bank actions/reactions to that economic strength or weakness. I believe gold traders would, for example, respond very favorably if the US Federal Reserve announced another round of quantitative easing (QE III) to boost the US economy. This action could push more US dollars into circulation, holding interest rates down, weaken the US dollar, and increase the specter of future inflation-possibly the ideal soup for higher gold prices. Oil traders have recently been using the jobs report as a barometer of the strength of the US economy. As the jobs situation in the US has improved oil prices have risen with the expectations of higher demand. The ever-present tension between the West and Iran has also added upward pressure on oil prices. Natural gas was again the best performing commodity sector and remains extraordinarily volatile. Coffee, sugar, and aluminum were among the worst performing commodity sectors. Coffee prices have dropped nearly 20% this year; I hope to see that savings passed on to those of us who love our java in the morning.

The US dollar continued to strengthen against most major currencies last week. The Euro fell another 0.5% to close Friday at $1.312 as the Greece debt crisis moves to the next chapter. The US Dollar Index reported by the Wall Street Journal and represents a collection of foreign currencies has risen (representing strength for the US dollar) for the month and has shown a positive trend for the US dollar in the past several weeks making up for a poor start early in the year. Ramifications of this trend are important especially in commodity prices and international trade.

There has been minimal movement in the bond market this year and the past week was no exception. The Barclays Aggregate US Bond index fell 0.24% last week and is up just 0.70% for the year. The US Treasury 10-year yield moved back above 2% last week to close Friday at 2.030%. The US Treasury 30-year yield also increased to close at 3.179%. The increasing number of media reports on improving economic conditions in the US and Federal Reserve Chairman Bernanke's broad guidance that he did not expect to need another around of quantitative easing helped reduce the demand for bonds pushing interest rates slightly higher. Interest rate changes in Europe were mixed last week. France and Spain saw rates increase while Germany and Italy saw small declines. Spain's increase follows an announcement earlier by the prime minister that he would not hold Spanish debt to recently agreed to levels. For the week, there were modest gains in high yield municipals, low/short duration bonds, emerging market debt, and Treasury Inflation Protection Notes (TIPs) while extended duration Treasuries and intermediate municipals were the worst performing bond sectors. For the year, preferreds, international TIPs, and high yield have been the best performing sectors while extended duration Treasuries and corporates have been the worst.

IS EUROPE OUT OF TROUBLE?

A great sigh of relief will take place among the political class in Europe early Monday morning after the private debt exchange appears to have been successfully completed opening the door to the next full round of lending to Greece. The immediate crisis has been resolved, so no disorderly restructuring of Greek debt, and it appears that time has been bought for further efforts to deal with Portugal, Italy, Spain, and who knows who else. But, is Europe, and the EU really out of trouble?

I believe the answer is yes in the short-term and no in the longer-term.

For now, there is not the immediate threat of a meltdown in Europe because of an out-of-control market reaction to the Greek default. The ECB has played a critical role in calming markets down with their Long Term Refinancing Option (LTRO) which has injected critical liquidity into the

markets and pushed down dangerously high interest rates in Spain and Italy, and the EU's politicians have made some efforts towards a unified fiscal union by agreeing to modifications to existing treaty obligations. However, there remains great doubt about the future.

I have said repeatedly in my Updates that the real problem with Europe is that governmental and private sectors are simply too indebted with too little growth to deal with the problem without entire populations feeling the pain of adjusting to the new fiscal realities. Greece's economy shrank 7.5% in the 4th Quarter of 2011 and with the extreme austerity measures required to receive the second bailout, growth is highly unlikely to return for the foreseeable future. Adding to the underlying stress is an unemployment rate of 21% and climbing. I would not be surprised to see social unrest return to the streets. Spain is also confronting austerity issues and unemployment around 20%. The prime minister has openly defied an agreement he just signed with other EU leaders to hold down debt and declared that the decision to exceed the agreement with the EU was a sovereign choice. So much for fiscal unity and subordination of national budgets to the EU so desired by Germany. So I remain very skeptical that the EU will get through this fundamental economic adjustment over the next decade or so without some painful spells along the way.

The consequences to the outcomes in Greece, Spain, and Portugal are important to all of us. Not just in terms of how much we export to Europe, but in watching and learning how the EU handles their debt and spending challenges. Although our situation here in the US different (we have a printing press and the US dollar is still the global reserve currency), the future of domestic growth, unemployment rates, funding of future government obligations are all at stake.

LOOKING AHEAD

Greece is off the table for now so more attention will be directed towards the slowdown in China, rising oil prices, US domestic economic growth, and the tensions in the Middle East. Attention will also be directed now at Portugal, Italy, and Spain as investors decide what will happen there. As I noted last week, there has been a bit of a pause in the markets for now. After seeing strong monthly gains in January and February, March has been flat. This is not necessarily a bad thing because markets historically do not go straight up, so pauses are to be expected. Additionally, the technical indicators that I follow are still positive, strongly so in some cases. Yet momentum has clearly slowed.

US stocks remain the strongest of the five major asset classes I follow on a relative strength basis. This has been the case since early January of this year. The technical leaders I follow and produced by Dorsey Wright & Associates (DWA) favor mid capitalization stocks, equal-weighted indexes, and growth stocks over value. This data also emphasizes most major economic sectors except for Financials and Telecom.

According to DWA, the four remaining major asset categories: Commodities, Bonds, Currencies, and International stocks are all fairly tightly clustered together but far behind US stocks on a relative strength basis. Within the Commodity asset category, Precious Metals and Energy are the two emphasized sectors within this space. International bonds and Treasuries are the top two emphasized bond sectors. I am leery of the Treasury sector because of the extraordinary low level of interest rates, and I believe a great deal of risk lies within the bond category, especially extended duration bonds, today. The top three currencies on a relative strength basis are the Australian dollar, the Brazilian Real, and the Canadian dollar. Among the last asset category, International stocks, the US sector and Developed markets are currently favored, but I continue to like the emerging market sector as well.

The February Retail Sales Report will be released Tuesday morning. Consensus is for an increase from 0.4% in January to a 1.2% increase for February with auto sales being the major factor in the increase. The Federal Reserve will release the highlights of their Federal Open Market Committee meeting Tuesday afternoon. The Fed is expected to keep interest rates at between 0% and 0.25%, and this would be consistent with previous announcements and expressed intention to leave interest rates unchanged. Investors will be watching to see if there is any language regarding any type of additional monetary easing (QE III). Thursday is the weekly Initial Jobless Claims report (consensus is calling for a slight drop in weekly claims to 355,000) along with the February Producer Price Index and Friday is the February Consumer Price Index. Both of these inflation indicators are expected to increase of about 0.5%. Rising prices will be a concern as it eats away from the purchasing power of individuals.

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 financial events and situations.

Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, including international economic, political and regulatory developments.

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.

TIPS are U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation. Increase in real interest rates can cause the price of inflation-protected debt securities to decrease. Interest payments on inflation-protected debt securities can be unpredictable.

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.

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.

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.

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

Wednesday, March 7, 2012

In a week which saw the Dow Jones Industrial Average (DJIA) close above 13,000 for the first time since May 2008, and the NASDAQ index reach 3000 for the first time in over 12 years, the markets finished the week flat. There was plenty of news for investors to digest: gold falling nearly $72 (-4%) an ounce on Wednesday, rumors of a pipeline fire in Saudi Arabia, generally improving economic data at home, and the successful debt sale by the European Central Bank (ECB); however, investors were unfazed and unmoved.

For the week, the DJIA fell just 5 points (-0.04%), the S&P 500 added 4 points (0.28%), and the NASDAQ led all US indexes with a 0.42% gain. The Russell 2000 index that includes more middle and small capitalization stocks fell the sharpest losing nearly 3% for the week. Moves in the Russell 2000 often capture investor sentiment towards riskier stocks because of the exposure to smaller companies, and last week signaled that some risk exposure was being trimmed. February 2012 finished out strong and the overall performance of stocks in the first two months of this year ranks among the best since 1987. For the year the DJIA is up 6.22%, the S&P 500 is up 8.91%, the Russell 2000 is up 8.30%, and the NASDAQ is up a strong 14.24%. As a point of comparison, the four major indexes were all up just about 6% at this same point last year.

Consumer Discretionary, Financials, and Information Technology were the best performing sectors last week easily bettering the DJIA, while Energy, Industrials, and Materials were the worst performers. For the year, Information Technology, Financials, Consumer Discretionary, Materials, and Industrials have all posted double-digit gains while only Utilities remains in negative territory down over 2%.

International stock indexes, like US indexes, posted mixed returns with the European-heavy MSCI EAFE index posting its worst weekly returns of 2012 dropping some 0.78%. Lingering concerns about the successful implementation of the private investor Greek bond swap has raised fears that the second Greek bailout may become stalled. Additionally, concerns arose about the ability of other European Union (EU) governments' ability to meet pledged debt and budget reduction goals this past week when Spain's Prime Minister announced that his country would not reach the goals set for 2012. I still believe that the EU will resolve all remaining issues and give Greece the approved €130 billion loan on schedule. Emerging markets was the best performing international sector for the week and remains firmly in the lead of any major stock index, domestic or international, so far in 2012.

Commodities fell broadly last week after gold and oil posted negative returns for the week. Gold prices dropped $68.10 (-3.83%) an ounce for the week, and WTI Oil fell $2.92 (-2.66%) a barrel to lead most other commodity sectors downward. The Dow Jones UBS Commodity Index (a broad-based commodity index) lost 1.11% last week, and is now up 4.98% for the year. Oil prices pulled back after reports of a possible pipeline malfunction in Saudi Arabia turned out to be false. The drop in gold followed comments by the US Federal Reserve Chairman Ben Bernanke on Wednesday that gave investors the impression that another round of quantitative easing would not be forthcoming. Each round of quantitative easing results in more easy money in circulation. Easy money depresses the value of the US dollar, which in turn leads to lower commodity prices abroad, increasing global demand, and thus prices here in the US. In the long run easy money hurts everyone in the US through higher prices, low interest rates, and negative real return on many investments. Natural gas was the best performing commodity sector and remains extraordinarily volatile. Grains and other agricultural sectors managed to be modestly positive last week along with some industrial metals.

The US dollar gained against all the major currencies last week. The Euro fell two-and-a-half cents (-1.93%) to close Friday at $1.319 marking the largest one-week drop by the Euro in 2012. Worries about Greece "closing the deal" with the EU bailout and Bernanke's comments here that he was unlikely to weaken the dollar further brought investors back to the US dollar. The Federal Reserve remains committed to low interest rates for the foreseeable future, but it looks for now that there will not be any more new money creation to achieve that goal. The strengthening of the US dollar was also partially responsible for the drop in precious metals and oil last week.

US bonds maintained last week. I say maintained because there has been very little movement in bond indexes so far in 2012. The Barclays Aggregate US Bond index added 0.21% matching the previous week's gain of 0.21%. For the year this widely watched index is up 0.94%. The US Treasury 10-year moved above 2% last week put closed Friday at 1.977%--the same rate as the previous Friday. The US Treasury 30-year gained slightly to close at 3.108%. Every major European 10-year sovereign interest rate fell again last week as the ECB issued another €529.5 billion in low interest loans under the Long Term Refinancing Operation (LTRO). As of close of market on Friday Italy and Spain had sub-5% 10-year yields and this has taken a great deal of pressure off EU governments for now. Emerging market debt, preferreds, and high quality corporate bonds were the best performing bond sectors for the week while short-duration international sovereigns, Treasury Inflation Protection notes, and high yield bonds were the worst. For the year, preferreds, international, and high yield remain the best performing sectors while everything US Treasury-related, especially long-duration, have been the worst.

ARE THE MARKETS LOSING STEAM?

Anytime a key stock index reaches a nice round number as we did this week when the DJIA reached 13,000, investors inevitably question whether the markets have become too extended and if a pullback is imminent. Fair questions especially in light of what has happened over the past decade or so. Before I give you my thoughts on these subjects I will begin by saying I have no idea if the market has reached its peak for 2012 or whether or not we have a ways yet to go. I cannot predict interest rates, or stock prices, any more than I can tell you with certainty who is going to control the White House in 2013. I am not afraid to admit this to you because I am being completely honest and I am also in great company...100% of every other financial advisor and economist in the country has no idea either. But, and this is important, I can certainly offer you insights to where the markets are and what trends I am seeing and this is what I will offer in this Update.

One of the key indicators I use to evaluate the markets is the New York Stock Exchange Bullish Percent (NYSEBP). I discussed this indicator last week and said that the current level of the NYSEBP (76.2%) suggests there is greater risk in the market today. Any reading over 70% signals higher risk. I have also said that the markets are overbought meaning that when looking at prices over the past ten weeks, investments are trading at the very upper end of their price distribution curve. All of this suggests that the likelihood of a pause, pullback, or correction has increased. Markets never go up or down in one constant direction, there are always runs counter to the longer trend imbedded in any bull or bear market. However, there is empirical statistical data to reinforce gut instinct, and I much prefer data to instinct.

Another data point that I am watching is the rate of increase in the NYSEBP. For the first five weeks of the year, the NYSEBP was improving by 5% to 8% each week as the NYSEBP rose from 53% (start of year) to the 76% it is today. Over the last four weeks this number has been dropping meaning that the rate of increase has begun to slow signaling that fewer and fewer stocks are showing first-time point and figure buy signals. This past week saw the first negative number of the year as the NYSEBP fell 0.8%. This suggests that the "easy" part of the move upwards is over for now. It does not mean that indexes cannot go higher as stocks continue their rally and demand remains fully in control of the markets. It is just a cautionary note and one I am watching.

Finally I evaluate how far overbought or oversold the markets become. The S&P 500 is currently overbought by 81.8%. This number is high, but not alarming so. Moving above 100% becomes worrisome and anything over 150% is clearly flashing danger for a pause or correction. Currently the most overbought sector is emerging market bonds which is overbought by 191% while the most oversold sectors are managed futures and long-duration treasuries. If you own either sector you understand that these sectors have not performed well in 2012.

In sharing this information I am not trying to make everyone an expert in some of the technical analysis I follow, but rather to help provide some insight into how I see the markets. There are tools that help judge risk levels and provide some indication of the likelihood of something happening in the markets. Today the likelihood of a pause, pullback, or correction (or simply losing steam) is greater than it has been in quite a while. I do not know if and when this will happen, but it suggests patience at this point in time.

LOOKING AHEAD

The amount of information flooding into the news cycle for investors is staggering. There must be a dozen important stories coming daily from Europe about the debt crisis, Iran and the problems in the Middle East, and how our own economic situation here is becoming increasingly positive. When all of this is blended into the soup du jour, coupled with the strong move by most stock markets in 2012, it is not surprising to see the markets take a pause as they have these past couple of weeks.

Going into the week the US stocks asset category is the strongest, on a relative strength basis, of the five major asset categories I follow. Within the US stock asset category, I continue to favor mid-capitalization growth stocks and equal-weighted indices (which tend to overweight mid-capitalization stocks). Every major economic sector is currently favored with Consumer Discretionary, Information Technology, and Real Estate the strongest on a relative basis.

Commodities remain the second-ranked asset category followed by Bonds, Currencies, and finally International stocks. Within commodities I continue to favor energy and precious metals. The recent weakness in energy and gold is not especially troublesome at this point but certainly must be followed. A surge in the US dollar would provide a headwind to rising commodity prices going forward.

Within the bond asset category, I like International bonds, a mix of high yield and quality corporate bonds, and inflation protection bonds. One of the unfortunate by-products of the Federal Reserve's low interest rate policy is that many conservative investors, especially those who rely on bonds for their income, are being forced into more risky bonds in search of yield/income. With greater risk comes the need for greater vigilance.

For international investors I like the emerging market sector with emphasis on the Asia/Pacific region. Turkey, India, and Brazil have all be exceptionally strong so far in 2012. The volatility within emerging markets raises risk for investors so be sensitive to this risk.

It is a relatively quiet week for major economic reports. The regular Initial Jobless Claims report will come out at the usual 8:30 AM Thursday time, but this is likely to be eclipsed by the Employment Situation report on Friday morning. Expectations are for the unemployment rate to remain steady at 8.3% with a slight drop in non-farm payroll job creation.

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 financial events and situations.

Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, including international economic, political and regulatory developments.

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.

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.

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.

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