Unrest continued in the Middle East this past week, with little hope of resolution causing oil prices to continue their dramatic rise. US economic data was generally positive, and the president of the European Central Bank sees the threat of inflation growing.

Stock markets both here and abroad were volatile but ended the week with slight gains. The Dow Jones Industrial Average (DJIA) gained 39 points (+0.33%) to close the week at 12,170 and the S&P 500 added 1 point (+0.10%) to close at 1321. For the year, the DJIA is up 5.12% and the S&P 500 is up 5.05%. The Russell 2000 gained 3 points (+0.37%) and for the year is up 5.28%.

Among the broad economic sectors in the US economy, two traditionally defensive sectors Health Care and Utilities were the top performers along with Materials (boosted by coal and mining stocks) last week while Financials, Telecom, and Real Estate were the bottom three sectors. Year-to-date Energy is dominating all sectors up over 14% followed by Information Technology and Health Care taking over the third position. Telecom, Consumer Staples, and Materials are the bottom three. Telecom continues to be the only sector negative for the year.

The MSCI (EAFE) World Index gained 0.82% for the week and is now up 5.27% for the year. For the week, strength moved east as countries like Pakistan, South Korea and India were the best performers while Middle Eastern countries, not surprisingly, were the worst performers. Peru is the one non-Middle Eastern Country that found itself in the bottom five last week. For the year, Europe continues to lead all countries in total performance while Egypt, UAE, Qatar, Peru, and India remain solidly at the bottom. China has recently been showing some strength and will bear watching.

The Euro continued to make solid gains against the US dollar last week closing just below $1.40 at $1.3987 compared to the previous week's close of $1.3754. The Euro will continue to attract buyers over the US dollar following comments from the European Central Bank President, Jean-Claude Trichet warning Thursday about the potential for inflation and said that a hike in interest rates was possible in the next few months. Compared to the Federal Reserve Chairman's continued support of an accommodative monetary policy (low interest rates), it is clear to currency investors that non-US bonds are a better investment. Strength of the Euro will continue as long as the European Union can resolve the terms of their debt bailout facility in the next month. Always reminding us that the debt problem is never far away, Fitch announced that they were downgrading Spain's outlook from "stable" to "negative" on concerns over bank restructuring. Early Monday morning (March 7th) Moody's announced a major reduction in Greece's debt rating three notches to B1 from Ba1. These moves push Greece's rating deeper down into junk status.

Gold gained $19.10 (+1.36%) per ounce on Friday to close the week at $1428.40. For the year, gold is up 0.61% with gains of nearly 6% in the last 30 days. Gold remains an important hedge against uncertainty.

Oil was the biggest mover in the commodity space again last week. Oil gained $6.85 per barrel (7.00%) for West Texas Intermediate and closed at $104.73. I suspect the huge swings in oil prices will continue for now. I also know that we are all feeling the impact at the gas pump. A week ago I paid $3.49 per gallon for premium in Virginia Beach, and today (Sunday, March 6th) I paid $3.65 a jump of $0.16 (4.6%). The price of oil, if it continues at this level, will negatively impact the current recovery here in the US as well as abroad. Most economists, however, cannot say how high oil must go and for how long before the economy begins to see an oil-related slowdown. On more reason I like to follow the numbers and look for the trends to develop with the help of Dorsey Wright & Associates.

Bonds pulled back a bit last week. The 10-year Treasury yield closed Friday at 3.494% slightly higher than the previous week's close of 3.415%. The 30-year Treasury yield also increased at a slightly greater rate than the 10-year causing the "spread" or the difference between the 10-year and 30-year yields to widen slightly. The 30-year Treasury is most sensitive to anticipated interest rate/inflation increases. The Barclays Aggregate Bond Index, representing a broad basket of US bonds, fell 0.05% for the week but remains positive (0.17%) for the year.

KEY HEADLINES

I am not going to dwell on the turmoil in the Middle East. It speaks for itself. However, the long-term impact of high oil prices will serve to slow global growth and any further interruption of oil supplies will create an immediate and very difficult economic environment.

Commodities in general have continued to post gains. The weakening of the US dollar is a major driver in higher commodity prices. A perceived growing global economy is also adding to the higher prices. Please keep in mind that commodities are a very volatile investment and can change direction quickly, and any investment in this area should be measured.

The US unemployment report came in moderately positive with a net gain of 192,000 jobs and the overall unemployment rate fell to 8.9%. This is the minimum rate of growth necessary to start making an impact in the serious unemployment problem that has been in place for the past two years. I applaud this number, but the country needs consistent monthly gains of 250,000 to indicate that the economy is really picking up steam. Additionally, the overall unemployment rate is falling mainly because the Department of Labor has taken hundreds of thousands of workers out of the labor pool in the last six months. If any of these people start looking for jobs, the stated unemployment rate will reverse course and start rising.

The Europeans are continuing their meetings to reach an agreement on the bailout fund which has helped countries like Greece and Ireland get their borrowing on an affordable and sustainable path. The Irish are expected to come back and try to renegotiate the rates on their bailout package and with Spain's downgrade by Fitch, the work by the debt committee gains in importance. A successful conclusion of this plan will be a strong boost to Europe.

Looking Ahead

The unrest in the Middle East continues. Gadhafi has shown that he will take any measure to hold onto power, and it is doubtful that without a strong intervention by the US or Europeans, Libya's troubles will continue for the foreseeable future keeping energy markets on pins and needles. The Saudi's have come out and said any demonstrations are illegal under Saudi law and will not be tolerated in anticipation with this Wednesday's (March 9th) scheduled protests. The stability of Saudi Arabia is critical.

The gaining strength of the US economy pushing against the uncertainty of the world's oil supply and oil prices has investors without a clear signal in market direction. Looking at my Point and Figure charts of the DJIA and S&P 500, this could not be clearer. Buyers and sellers are currently in a battle for supremacy and I will be watching closely to see which direction the charts break. A move to 12,300 by the DJIA will be a very positive sign, while the DJIA at 12,000 or below will be a negative. For the S&P 500 a move to 1350 will be a positive sign, while a move to 1290 will be negative. For the week, the New York Stock Exchange Bullish Percent (NYSEBP) remains in a column of X's (demand in control) at a strong reading of 77.14.

Equities remain favored over bonds. Small and Mid capitalization stocks are favored over large cap, and growth is favored over value. Energy, Industrials, and Technology are my favored sectors, and I still favor Emerging Markets over Developed (although both are doing well).

International bonds have started to show strength as interest rates gain abroad and the US dollar weakens. I prefer corporate bonds over municipals or Treasuries, and I continue to like high yield and preferreds.

Commodities will remain volatile. I continue to believe that oil prices are very sensitive to the uncertainty in the Middle East and any threats to supply in any of the oil producing countries will cause a sharp increase in prices. A falling US dollar will also contribute to an increase in commodity prices in general. I believe that if you own gold, keep it. Gold remains a hedge against the global uncertainties. I see no reason at this time to sell any commodities in portfolios.

This market remains volatile and challenging. Stay alert and pay attention to your portfolios and 401(k) plans.

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.

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

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

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

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, 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.

NTrust Wealth Management | 780 Lynnhaven Parkway | Suite 190 | Virginia Beach | VA | 23452

The past week was dominated yet again by the turmoil in the Middle East with the focus turning away from Egypt and on to Libya. In response to the turmoil there, oil and gold prices jumped, the stock market fell, and interest rates dropped.

Stock markets around the world posted losses last week as investors struggled to gauge the new risks posed by the unrest in Libya. The Dow Jones Industrial Average (DJIA) lost 261 points (-2.10%) to close the week at 12,130 and the S&P 500 gave back 23 points (-1.72%) to close at 1320. For both indexes it was the largest percentage drop since the week of November 12, 2010. For the year, the DJIA is up 4.78% and the S&P 500 is up 4.95%. The Russell 2000 lost 12.27 points (-1.47%) and for the year is up 4.89%.

Among the broad economic sectors in the US economy, only Energy posted a positive gain last week, however, the next two best performing sectors: Utilities and Real Estate were off just marginally. Industrials, Materials, and Consumer Discretionary were the bottom three sectors for the week. Year-to-date Energy, Information Technology, and Industrials are the top performing sectors while Telecom, Consumer Staples, and Utilities are the worst. Only the Telecom sector has a negative return so far for 2011.

The MSCI (EAFE) World Index lost 1.56% for the week and is now up 4.42% for the year. Developed Markets, predominantly European countries, have outperformed so far in 2011. As I have highlighted in previous Weekly Updates, the best performing countries this year were last year's dogs. Greece, Spain, and Italy are all up double digits while France and Portugal are also well above the MSCI (EAFE) World Index return. Emerging Markets are continuing to struggle. India, the largest of the emerging market countries, is down 15% so far in 2011. Chile and Turkey are also down double digits. The international space continues to challenge investors.

The Euro continued its gains against the US dollar last week adding 0.41% closing at $1.3754 compared to the previous week's close of $1.3698. For the year, the Euro is up 2.88% compared to the US dollar. The Euro ended 2010 at $1.3369. The strength or weakness of the US dollar recently remains fixed to investor expectations regarding interest rates with the notion of the US dollar serving as a "safe haven" as a secondary driver. Here in the United States, the Chairman of the Federal Reserve, Ben Bernanke, has continually reinforced his commitment to an accommodative monetary policy (low interest rates and growing money supply) which continues to hold US interest rates down and lowers the demand for US debt. With lower yields, foreign investors have less interest in US debt and will look elsewhere for higher yielding debt thus lowering demand for US dollars, keeping our currency cheaper compared to other currencies.

There are enormous geopolitical consequences to a weak dollar both here and abroad. We are seeing some of this played out today as food inflation is helping to foster the unrest we are seeing in the Arab world. Emerging market countries are dealing with new inflation pressures and are resorting to tightening monetary policies to stem the impact of cheap US dollars flooding the world contributing in part to their recent under-performance.

Gold closed Friday at $1409.30 after another week of strong gains. Gold is now up 5.66% for the month and is just below the close of 2010 of $1419.70. Investors will continue to use gold as a hedge against uncertainty around the world. Compared to stocks, gold has not been a great investment this year, however, when stock markets suffer under the weight of political unrest; gold has served as a hedge against this uncertainty. I hold gold today for this reason.

Oil was the biggest mover in the commodity space last week. With worries of a disruption of Libyan oil supplies, oil gained $11.88 per barrel (13.81%) for West Texas Intermediate. At one point during the week, oil jumped to $103 per barrel before pulling back on the news that Saudi Arabia would step up oil production to make up for the loss of Libyan oil. Gasoline prices have jumped dramatically at the pump here at home as I know everyone is aware. I recently paid $3.49 per gallon which is the most I have paid since oil prices shot up to $147 a barrel in 2008. I will discuss the impact of oil prices on the economy in a moment.

Bonds rallied for a second week with the Barclays Aggregate Bond Index gaining 0.73% and is now up 0.22% for the year. The 10-year Treasury yield closed Friday at 3.415% down from the previous week's close of 3.634%. This was the largest drop of the 10-year yield so far in 2011. The 30-year Treasury yield also fell last week to 4.497% from the previous Friday's close of 4.716%. With oil prices rising dramatically, and with it inflationary expectations, you may be wondering why longer-term interest rates fell. I will offer an explanation below.

GLOBAL UNREST, OIL PRICES SURGE, AND INTEREST RATES DECLINE--WHY?

Oil prices surged last week over concerns that the Middle East oil supply was at risk of interruption. Prices pulled back somewhat when Saudi Arabia said it would make up any supply shortfalls from Libya calming investor worries. Nonetheless, oil still gained nearly 14% and for a time reached $100 per barrel. Why did the equity and bond markets react the way they did?

Stocks pulled back for several reasons. For starters, stock markets hate uncertainty, and the unrest abroad makes investors nervous. The worst possible scenario would be for the unrest in the Middle East to spread to Saudi Arabia. If that should happen, then you would see a major correction of stock markets all over the world. As of this moment, it is too early to tell what the final outcome of all of this will be. I do believe the face of the Middle East, for good or bad, will be significantly altered. Second, higher priced oil serves as a drag on global economies. For every extra dollar or euro spent on oil, there is one less to spend on other items. And this anticipated effect is what has had the greatest impact on the US stock market. Let me put it another way, for every $10 increase in the price of oil, the US will spend another $75 billion for oil and not on clothes, furniture, electronic gadgets, or other items. Goldman Sachs has published a paper that suggests that for every $10 increase in the price of a barrel of oil it will shave 0.2% off the US Gross Domestic Product (GDP). This major diversion of US dollars away from other sectors and industries at a time when the fragile US recovery is still in doubt will hurt family budgets and corporate profits.

The bond market's reaction may be the most curious of all. Bond investors hate inflation. They hate higher interest rates. With oil prices surging, the prevailing view should be that inflation is just around the corner. Yet bond yields fell. The 30-year Treasury yield is most sensitive to inflationary worries and that yield fell last week. The bond markets are signaling that inflation is not the problem, but a slowing economy is. Bond investors do well in weak economic times when inflation is tame. Additionally, as investors fear the stock market, they turn to the bond market and this additional demand helps push up bond prices and yields down.

So watch the 10-year and 30-year Treasury yields for inflation expectations. Watch the price of gold for the level of uncertainty in the world, and the stock markets for investor expectations of economic growth within their respective countries.

A BRIEF WORD ON EUROPE

Irish voters went to the polls this past Friday. The ruling party, Fianna Fail, is expected to be thrashed by voters after being in power for the past 13 years and overseeing the bank debacle and agreeing to the bailout by the European Union (EU) and International Monetary Fund (IMF). According to the Wall Street Journal this past weekend, the Fine Gael party (a slightly center-right organization) is expected to win the most seats; however, it is doubtful that it will be enough to form a ruling majority. If other, more liberal parties gain a solid position within the Parliament, the terms of the bailout may be called into question, and the Irish may renege on previous bailout terms hurting the credibility of the EU and the Euro.

I raise this point to highlight the difficulty the Europeans can expect to have as the EU finance ministers meet in March to craft new terms to the EU bailout fund. Remember that at the heart of the new terms being pressed by Germany and France is to require countries that take loans to become more compliant to the EU and the European Central Bank's terms. In other words, a country would be required to give up a portion of its sovereignty to the EU. The loss of power by Fianna Fail will serve as a strong warning to other politicians considering a bailout. Portuguese leaders have been adamant about rejecting a bailout, and the reason may be more for political survival than any other. When asked to give up their sovereignty, European leaders may try to find other alternatives to the EU's proposed heavy hand. Because it is not on the front page of the Wall Street Journal or Financial Times, it does not mean that the European debt crisis is over and all is good in Euroland. I suggest that it is imperative to not lose sight of what is going on in Europe.

Looking Ahead

Unrest around the world, particularly in the Middle East, continues. By the time this Weekly Update is published, Libya may have a new leader, or at least Gadhafi could be gone. There is no clear picture of whom or what would replace the dictator if he should fall. Let us all hope and pray that the transition can proceed with a minimal loss of life and without the country imploding into chaos.

I also have mentioned before that China is getting pressured by outside Chinese dissidents to become more democratic. China has many of the same problems that have contributed to the unrest in the Middle East: inflation, high food prices, growing unemployment, corruption by government officials, and growing disparity between the haves and have nots. I expect that the autocrats that run China to move quickly to quash all pro-democracy efforts as they have in the past. This will not, however, fix the problems that are affecting the economy. For the year, China's markets are off by over 2%.

The first week of the month brings important economic data. After the Department of Labor announced last week that the nation's GDP was revised downward from an annual rate of 3.2% in the 4th Quarter, to 2.8%, the data on January unemployment will be watched carefully (released at 8:30 AM on March 4th, Friday). The economic data is not all bad and there has been growth, but any sign of weakness would be problematic. Key data being released: Monday-Personal Income, Pending Home Sales, and the Chicago Purchasing Manager's Index; Tuesday-Construction Spending, and the ISM Manufacturing Index; Thursday-ISM Non-manufacturing Index; and Friday is the Unemployment Rate.

The New York Stock Exchange Bullish Percent fell to 76.37 last week. Not enough to reverse so demand for stocks remains in control. It will take a reading of 74.32 to cause a reversal. Small and mid-capitalization stocks remain favored. Equal-weighted indexes are favored over capitalization-weighted indexes. US and International stocks are favored over Commodities, Bonds, and Foreign Currencies. Emerging Markets remain preferred over Developed Markets (this relationship is under pressure right now).

My favored sectors are Energy, Technology, and Industrials. My views on bonds have not changed in 2011. Bonds will return bond-like returns. Nothing spectacular. On a relative strength basis, High Yield, Preferred, and Floating-Rate bonds are favored. Intermediate-term corporates continue to perform well.

Commodities are volatile. I continue to believe that oil prices are clearly sensitive to the uncertainty in the Middle East and any threats to supplies in any of the oil producing countries can cause a sharp increase in prices. A falling US dollar will also contribute to an increase in commodity prices in general. Gold is trying to get even for the year. I believe that if you own gold, keep it. Gold remains a hedge against the global uncertainties. I see no reason at this time to sell any commodities in portfolios.

On a personal note I want to thank all of you who have sent me kind notes about my involvement in last weekend's Wall Street Journal article titled "Boomers Find 401(k) Plans Fall Short." I was privileged to speak to the article's author, Jim Browning, a number of times about this important subject, and his article was extremely well received and picked up by nearly every major news outlet around the country. If you have not seen or read the article, please contact me and I will make sure you get a copy.

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

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

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

Sincerely,

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

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

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

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

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

Securities and Advisory Services offered through Commonwealth Financial Network(R), Member FINRA/SIPC, a Registered Investment Adviser. NTrust Wealth Management | 780 Lynnhaven Parkway | Suite 190 | Virginia Beach | VA | 23452

The Weekly Update is back after a one week break as I successfully fought off a serious sinus infection. My wife, Virginia, reminded me that I did not get a flu shot this year against her advice, and I admit that I have paid the price for being a "typical guy."

Financial news has taken a back seat recently to the political news coming in from the Middle East and here in the United States. The Egyptian protests have garnered nearly 24/7 coverage on the cable news networks as we watched the unrest continue and now spread throughout the broader Middle East. Oil is the blood of international commerce, and most of it is produced in the Middle East making what happens there critical to our economic health. Here in the United States the political protesting occurring in Wisconsin is bringing the battle over fiscal philosophies to a boiling point. I fully expect this type of discourse to spread to other states over the year, and this does not even begin to speak to the battles beginning to take shape in the US Congress over our federal budget deficits. Looking at these major stories, I believe that if the Middle East devolves into chaos and disrupts the flow of oil, this will have a significant impact on markets. As our internal debates rage here, I would not expect major impacts on our markets in the near-term. If budget deficits continue to grow at current rates, however, the economy will begin to suffer and the first signal of this will likely come from a significant rise in interest rates.

The markets have continued their very steady increases here in the US. Seven weeks into the trading year, the Dow Jones Industrial Average (DJIA) has been up six of the weeks, and the S&P 500 has been up five of the seven. Last week, the DJIA added 118 points (+0.96%) and the S&P 500 added 14 points (+1.04%). The Russell 2000 was the best performer of the big three adding 12 points (+1.47%). For the year the DJIA is up 7.03%, the S&P 500 is up 6.79%, and the Russell 2000 is up 6.45%.

The top three broad economic sectors last week were Energy, Health Care and Materials while Telecom, Consumer Staples, and Utilities were the bottom three. For the year, Energy is now up double digits followed by Industrials, and Information Technology. Every sector is positive for the year.

The MSCI (EAFE) World Index gained 2.04% for the week and is now up 6.07% for the year. International performance has been disparate and uneven so far in 2011. Spain, Italy, and France are the top three countries that I follow posting double digit gains. Recall that last year these countries were significant underperformers due to the uncertainties surrounding the European debt crisis. At the bottom of my list of countries are Egypt, India, Chile, and South Africa, all countries that had performed exceptionally well or above the broader indexes last year. In general, Developed Markets have out-performed Emerging Markets, and the Middle East appears to remain under greater stress than most other areas of the world.

There has been some news coming in late last week regarding Portugal's debt situation. The interest rates on their 5 and 10-year government bonds have pushed above 7%. This is considered an unsustainable level and prompting calls for the Portuguese to accept a bailout from the European Union (EU). The EU will spend the next month or so trying to formalize the terms of the permanent bailout fund. The sticking points center on just how much power the EU will be given over individual member countries that do not adhere to the rules. The European debt crisis ebbs and flows and it must be watched carefully.

Chinese markets are slightly positive this year, but news on Friday that the Peoples Bank of China is increasing the banking reserve requirement for the second time this year (6 times in 2010), to 20% will certainly impact Chinese markets when they open on Monday. Additionally, just gaining coverage by the media is growing unrest as Chinese activists seek to piggy-back off the unrest in the Middle East. So far, Chinese authorities have aggressively moved to squelch the "Jasmine Revolution."

The Euro gained just over 1% against the US dollar last week closing Friday at $1.3698 up from the previous week's close of $1.3540. The Euro has remained relatively stable against the dollar so far in 2011 posting a 2.5% increase for the year. Most of this gain in the Euro (and other currencies) against the US dollar reflect the view that long-term interest rates of US Treasuries will remain below those of other countries. A broader index, the NYCE U.S. Dollar Index (DX/Y), has also fallen about 1.8% for the year (the higher the index, the stronger the US dollar). Federal Reserve Chairman Ben Bernanke defended his quantitative easing policy in a speech last Friday in Paris to the finance leaders of the G-20 (top 20 world economies), reinforcing the belief by investors that the Federal Reserve will continue to keep interest rates as low as possible for the foreseeable future.

Gold posted its largest increase so far this year gaining $28.20 (2.07%) as gold closed Friday at $1388.10 per ounce. After being down over 6% earlier in 2011, gold is now down 2.23% for the year. Oil (WTI) added $0.42 (+0.49%) to close the week at $86.00. For the year, however, oil remains off 5.72% even as the energy sector in general continues to rally. A broader look at commodities shows they remain in a general up trend, but trailing the broader US stock indexes. I will reiterate my belief that all commodity prices will be impacted should political unrest spread and impact global commodity producers.

Bonds rallied last week with the Barclays Aggregate Bond Index gaining 0.46% and is now down 0.5% for the year. The 10-year Treasury yield closed Friday at 3.5850% down from the previous week's close of 3.6380%. For the year, high yield and preferred bonds have been the best performers while long-term Treasuries and corporates have been the worst performers.

THE NEW YORK STOCK EXCHANGE BULLISH PERCENT (NYSEBP)

The NYSEBP is my most important general barometer of the market's "mood." By mood I mean is the market generally supporting higher prices or lower prices? I discussed the general tenants of the NYSEBP in my Weekly Update of January 23, 2011, but I want to add to that discussion.

As of Friday, the NYSEBP reading is 80.29. Moving over 80 is a very significant event as this marks only the fourth time a reading this high has occurred in the past 10 years. This means that the markets are considered extremely overbought and demand for stocks is clearly in control.

All of economics is based upon the concept of SUPPLY and DEMAND. In other words, when people in general want (demand) more of something than is available, prices will rise; and when people do not desire (supply) something, prices will fall. To see this concept at work today I have to look no further than the Elton John concert in Norfolk, Virginia, this coming March. Tickets were clearly in demand as all available supply was sold within 90 minutes after they went on sale. Since then, a variety of ticket brokers have listed a limited number of tickets for sale at prices as much as 100 times face value. Demand is clearly in control of these tickets.

The NYSEBP measures the intensity of this demand (or supply) across a very broad spectrum of stocks, and as the NYSEBP rises above 80, demand is strongly in control. The question everyone wants to know is how long this intensity will remain, but unfortunately there is no way to answer that question. In the previous three times over the past 10 years that the NYSEBP has risen above 80 and reversed down (supply in control), the average time from peak to reversal has been 39 days (10, 41, and 67 days). The current NYSEBP peak occurred on January 18th at 80.33, but until the NYSEBP reverses, it will not be possible to determine if that peak will in fact be the peak for this current period. It will take a move of the NYSEBP down to 74.32 before a reversal will occur with the current peak. As of today, February 20th, it has been 33 days since the NYSEBP peaked. If you take nothing else away from this discussion, recognize that the level of risk is high in this market and entry positions of new equity securities should be taken with careful consideration.

Looking Ahead

For now it appears that the political news both here and abroad will continue to dominate the headlines. I will be watching to see how the news of China's tightening and political unrest in the Middle East will impact the markets this coming week.

Small and mid-capitalization stocks continue to perform strongly and the Russell 2000 is closing in on the DJIA's performance this year. I continue to recommend small and mid capitalization stocks. I prefer equal weighted indexes over capitalization weighted indexes. I continue to like the Consumer Discretionary, Materials, Energy, Real Estate, and Technology sectors.

The international sector is performing admirably. Developed and Emerging Markets both exceeded the US markets last week and are carrying some near-term momentum. I believe that the risk here is high right now given the unrest developing abroad.

Most bonds are showing steady performance. I continue to believe that bonds will perform like bonds, not like equities as they have over the past two years. I am avoiding any longer-dated maturities and focusing on intermediate-term corporates and high-income, floating rates, and preferred bonds.

Commodities are volatile. I continue to believe that oil prices are clearly sensitive to the uncertainty in the Middle East and any threats to supplies in any of the oil producing countries can cause a sharp increase in prices. A falling US dollar will also contribute to an increase in commodity prices in general. Gold is trying to get even for the year. I believe that if you own gold, keep it. Gold remains a hedge against the global uncertainties. I see no reason at this time to sell any commodities in portfolios.

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.

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

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

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

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, 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.

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The world watched events unfolding in Egypt closely last week and also digested a series of relatively good US economic reports moving equity markets upward around the world.

The Dow Jones Industrial Average (DJIA) gained 268 points (+2.27%) to close at 12,092. The S&P 500 added 35 points (+2.71%) to close at 1311, and the Russell 2000 added 25 points (+3.19%). For the year is up DJIA 4.45%, the S&P 500 is up 4.23%, and the Russell 2000 is up 2.10%.

Investors absorbed a swirl of conflicting news last week as positive US economic data was reported as scenes of chaos and rioting in Egypt shown around the clock on every news channel. The US unemployment rate dropped unexpectedly in January from 9.4% to 9.0%on a gain of just 36,000 net new jobs. Economists had been predicting the joblessness rate to increase by 0.1%. The extreme weather conditions throughout much of the US raised questions about validity of the data and certainly hurt the construction and transportation sectors. Positives taken from the report were a growth in manufacturing and private sector jobs, while the negatives include less than robust growth and an overall worker participation rate of the US population 16 and older at its lowest level since 1984 at 64.2%. Another data point out last week came from the Institute for Supply Management which showed the US services industry (90% of the economy) grew at the greatest rate since 2005. So the consensus of opinions remain that the US economy is growing, and will continue to grow, even though that rate of growth is not as robust as many would like to see.

The top three broad economic sectors last week were Energy, Materials, and Information Technology while Utilities, Real Estate, and Consumer Staples were the bottom three performers. For the year, Energy, Information Technology, and Industrials are the best performing sectors and Consumer Staples, Telecom, and Consumer Discretionary are the bottom three.

The MSCI (EAFE) World Index gained 1.69% for the week and is now up 3.93% for the year. Developed markets outperformed emerging markets and continued to widen that gap for 2011. On a sharp reversal from the previous week, Egyptian stocks posted the largest single country gain (trading on international markets) as investors appear to be gaining optimism (or are simply placing speculative bets) that the transition from Mubarak to anyone else, will go smoothly. According to Bloomberg, the Egyptian stock exchange will remain closed until at least February 8th, although banks opened for abbreviated hours on Sunday, February 6th. Turkey and Australia were the other top performers last week. The bottom three performers of the countries I follow were India, Brazil, and China. For the year, Spain, Italy, and France are the top performers while India, Egypt and Chile are the worst. Investors are growing concerned about the onset of strong inflation in emerging markets which is a major factor contributing to under-performance. These concerns were articulated by the International Monetary Fund's First Deputy Managing Director who said in an interview Friday with the Dow Jones Newswires that countries are running out of excess capacity while holding in place "expansionary, accommodative monetary and budgetary policies."

The Euro fell slightly closing the week at $1.3576 from last week's close of $1.3609. This drop was attributed to a variety of factors including the European Central Bank (ECB) President's comments that inflation in Europe was not a major concern for now and that rising prices were mostly in the energy and commodity areas leaving investors to conclude that the ECB will not raise interest rates in the near future. Additionally, some rather public disagreements emerged over policies proposed by Germany (and supported by France) to force weaker European Union (EU) countries to tighten their fiscal and monetary policies. The Germans proposed raising retirement ages, abolishing wage-to-inflation indexing (automatic cost of living adjustments), setting more uniform corporate tax rates, and installing some kind of controls over how much new borrowing a country can undertake. In other words, the Germans want to strengthen the role of the EU at the expense of individual country rights. This debate is far from over in Europe.

Commodities were flat to mostly higher last week. Gold rebounded slightly adding $6.60 per ounce (0.49%) to close at $1348.30. Gold is being pushed and pulled by investor concerns over the turmoil in Egypt while eying positive economic news from the United States. Oil prices dropped $0.31 (-0.35%) and closed the week at $89.03. Like most other asset class movements last week, belief that Egypt was not perilously close to collapsing and the Suez Canal and pipeline were not immediately threatened, contributed to oil's pullback. Additionally, the strengthening US dollar also helped stem price increases.

Bonds had their worst week of 2011 with the Barclays Aggregate Bond Index falling 1.25% pushing the broad bond index down 0.95% for the year. The 10-year Treasury yield increased to 3.6397% from the previous Friday's close of 3.229% following a series of positive economic reports. As investors gain confidence in the equity markets, bond positions are trimmed to raise cash to buy stocks pushing prices down and yields up. The high yield and floating rate sectors of the bond market were the best performers while long-term government bonds were the worst.

FOLLOW-UP ON THE JANUARY EFFECT

A couple of weeks ago I discussed the "January Effect" and I wanted to follow that up with some more analysis now that January has concluded. I attribute this analysis to my friends at Dorsey Wright & Associates in Richmond, Virginia.

The old market adage warns, "as January goes, so goes the year;" the idea of course being that if the first month of the year records a gain, the year will follow suit on a positive note. This is exactly how we are moving forward into 2011 since last month we witnessed the S&P 500 gain 2.26%. Conversely, if January begins the year in the trenches, the adage implies the overall year will leave investors loss stricken. There is research to support this historical bias, and using data going back to 1950 (as published by Stock Trader's Almanac), this barometer has roughly a 74% accuracy rate, and a 90% success rate of simply avoiding significant mistakes (the market moving 5%, or more, in the wrong direction). Since 1950 there have only been 7 years where the S&P 500 moved more than 5% in the opposite direction than how the month of January closed. Interestingly, 4 of those 7 years where the barometer has been "broken," came within the past decade! In 2001 the market offered a quick rally of 3.5% in January before nose-diving to post the sixth worst year on record since 1950 -- down 13%. Contrasting that move was 2003, when the S&P 500 closed January in negative territory leading up to the beginning of the 2nd Gulf War, but as we know ended the year up 26.4%. In 2008 the Barometer was right on target, as January was a down month (-6.1% for SPX) and the rest of the year was abominable, posting a loss of -38.5% for 2008. In January 2009, we started the year much like 2008 ended, with a loss of -8.6%. But after a March bottom, the market got back on solid footing and ended the year with huge gains of +23.5%. Now, that is the kind of error you like to see! The most recent "error" in the Barometer was just last year in 2010 when we entered the year with a -3.70% loss in the S&P 500, yet the rest of the year was quite positive as the market scratched back from the Summer doldrums and ended 2010 up 12.78%.

A point that bears repeating (that was displayed in the last two years) is that the "January Barometer" is notably better at predicting strong years than it is at predicting losers. Of the 24 red Januaries since 1950 the market has followed up with down years 54% of the time (13 occurrences), with only 4 double-digit rallies following a bad month of January (2010 and 2009 being the most recent). These historical tendencies are just that, tendencies, and can obviously be wrong and shouldn't serve as a primary indicator for anyone looking to tactically manage market risk. For this we turn to our market barometers and tactical allocation tools, which currently present a bullish outlook or guidance with regard to the equity markets, yet with a higher risk backdrop. Equities are currently a favored asset class (along with International Equities), and the NYSE Bullish Percent (NYSEBP) is in offense (>70), albeit in overbought territory.

Looking Ahead

The markets have posted nice gains so far in 2011; however, I believe that risk levels remain elevated. The NYSEBP closed the week at 78.96 up from last week's close at 78.30 well above the overbought level of 70 held since October 2010. Events unfolding in the Middle East will likely to continue impacting stock markets next week-good or bad.

Small and mid-capitalization stocks rallied strongly last week and closed the gap on large cap stocks, and they remain favored on a relative strength basis. I like the technology, energy, and basic materials sectors. Basic materials include metals, timber, and chemical companies.

Emerging markets rallied as well; however, they continue to under-perform developed markets. The major emerging market countries including India, Brazil, and China are all under-performing so far in 2011 as inflation continues to weigh on markets and investors expect economic tightening measures to continue or be put in place. I believe close scrutiny of emerging market holdings is warranted, but not outright selling of all positions.

Bonds had a tough week and investors should remain vigilant. Long-term treasuries and corporate bonds are clearly under the greatest stress. There are many different flavors in bonds and you should understand what types of bonds you have and adjust accordingly. I am still comfortable with the intermediate corporate bond category, but I believe that high yield and floating rate bonds should be considered as part of an overall bond portfolio at this time.

I believe that commodities will remain volatile. Oil prices are clearly sensitive to the uncertainty in the Middle East, but also to the strengthening of the US dollar. Gold strengthened last week and I still like it as a hedge against the uncertainty in the world. I will watch the price closely to see how it reacts to this week's events. The agriculture commodities have continued to rally and move higher.

The less sensitive indicators found in the Dynamic Asset Level Indicators (DALI) still show US and International stocks to be favored, Emerging Markets favored over Developed, equal-weighted indexes favored over capitalization-weighted, mid and small cap over large cap, and growth over value. Because the DALI is less sensitive than the markets in general, changes, when they occur, are significant.

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

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

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

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

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

Sincerely,

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

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

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

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

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

The news coming out of the Middle East late Thursday and Friday sent shock waves through the financial markets sending investors seeking the safety of the US dollar, gold, and US Treasuries. The Dow Jones Industrial Average (DJIA) lost 166 points (-1.39%) on Friday, the largest drop since November 16, 2010, pushing the DJIA down 48 points (-0.41%) for the week closing at 11,824. The S&P 500 lost 23 points (-1.79%) as well on Friday posting its largest one day loss since August 11, 2010. For the week the S&P 500 lost 7 points (-0.55%) to close at 1276. The Russell 2000 posted a loss of 2.52% on Friday, but managed a gain of 0.3% for the week. For the month and year, the DJIA is now up 2.13%, the S&P 500 is up 1.49%, and the Russell 2000 is down 1.05%.

The top three broad economic sectors last week were Real Estate, Energy, and Materials while Consumer Staples, Consumer Discretionary, and Health Care were the bottom three performers. For the year, Energy, Information Technology, and Industrials are the best performing sectors and Materials, Telecom, and Real Estate are the bottom three.

The MSCI (EAFE) World Index lost 1.21% on Friday but posted a gain of 0.37% for the week and is now up 2.2% for the year. Of the countries I follow, Egypt leads all decliners for the week and month. Last year's hot countries such as Chile, Indonesia, Turkey, India, and South Africa are all off double digits so far in 2011. Developed Europe still holds the top positions for the year as the debt crisis continues to be managed to investors' satisfaction. I continue to believe that this issue demands careful scrutiny given the complexity and uncertainty of the many issues facing Europe. The Euro closed down slightly against the US dollar for the week closing at $1.3609 compared to the previous week's close of $1.3615 as concerns over the political uncertainty of Egypt and the Middle East impacts the world's financial markets. For the year, the Euro is still up 1.8% against the US dollar. Emerging markets, with heavy exposure to the Far East and Latin America, continue to struggle this year as these regions fight local inflation and exposure to commodity prices. Emerging markets continue to hold the relative strength advantage over developed markets; however, this relationship has closed dramatically since the start of the year.

Commodities were mostly higher last week. Gold stopped its dramatic fall on Friday gaining 1.7% on Friday to close the week at $1341.70 adding $0.70 from last week's close of $1341.00. Friday's jump in gold continues to reinforce my belief that the metal is protection against uncertainty in the world's markets. For the year, gold is down 5.5%. Oil also surged 4.3% on Friday finishing the week at $89.34 per barrel (WTI) up $0.23 from the previous week's close. All of this action followed the same theme of the day and week as investors worry about the ramifications of the political unrest in Egypt. Oil investors have the added concerns over the access to the Suez Canal and a pipeline that together move over 2 million barrels of oil daily. Oil is now down just over 2% for 2011.

Bonds were the recipient last week of investors' move to safety. The Barclays Aggregate Bond Index gained 0.42% for the week and is now up 3 of the first 4 weeks of 2011. For the year the Barclays Aggregate Bond Index is up 0.30%. The 10-year treasury yield fell for the week closing Friday at 3.3229% from the previous week's close of 3.4081%. The news all week was negative for bonds including Standard & Poors downgrading Japan's credit rating from AA to AA-. This followed a report from Moody's Investor Services on Thursday saying that if there is no action to cut the growing US federal deficit that "the probability of assigning a negative outlook in the coming two years is rising." Additionally, Wednesday's announcement of the US 4th Quarter, 2010, Gross Domestic Product (GDP) of 3.2% also pushed bond prices lower. The jobs report showing first time unemployment claims jumped unexpectedly reinforced the likelihood that the Federal Reserve will complete all $600 billion of Treasury purchases which also helped hold down yields.

UNCERTAINTY EMERGING FROM EGYPT

We are all reminded of the political uncertainty in many parts of the world as we watched, and continue to watch, riots in Egyptian streets challenging the 30-year reign of Hosni Mubarak. Besides the stability that Mubarak has brought to the Middle East, the country controls the Suez Canal and a major oil pipeline. As I mentioned earlier, over 2 million barrels of crude oil (2% of daily global production) move through these facilities. Any disruption of these flows could have a significant impact on energy prices around the world. Additionally, Egypt is a major producer and exporter of cotton. Cotton is already at record high levels and any disruptions will add to these record prices.

The Wall Street Journal is already reporting that Egyptian banks and markets will be closed tomorrow (Monday, January 31st) adding further stress to the markets. There is no indication when these markets will reopen.

US ECONOMIC NEWS

I mentioned briefly that the 4th Quarter, 2010, GDP numbers were announced last week showing the quarter grew at 3.2% disappointing investors who were expecting a number closer to 3.5%. The GDP has grown each quarter (1.7% in 2nd Quarter, 2.6% in 3rd Quarter) of the last three in 2010, but the rate of growth is significantly below rates coming out of previous recessions. Additionally, most of the growth was attributed to increased consumer spending and there is doubt about how long the US consumer can continue to carry the economy. Other parts of the economy were either flat or down. The DJIA temporarily jumped over 12,000 on Wednesday morning, but could not hold that level after traders had time to fully digest the GDP numbers. Additionally, the Department of Labor (DoL) announced that first time unemployment claims jumped the previous week to 454,000 when a number closer to 405,000 was expected. Some of the increase was attributed to the bad weather in the eastern United States both in terms of the economy and data reporting. Without a doubt, the economy is not producing jobs at a level necessary to reduce unemployment below 9%. The January unemployment number will be released this Friday (February 4th) and if the rate remains above 9% as expected, this will mark the 21st consecutive month above 9% and will be the longest such streak since this statistic has been reported beginning in 1948. Finally, housing sales jumped 17.5% month-over-month providing talking heads on TV lots to get excited about; however, when this number is examined closely, most of the growth was due to the coming expiration of a California tax break similar to the one the federal government had earlier.

I agree with some of the pundits who say that the real challenge in US economic growth will come in the 2nd and 3rd Quarters of 2011 when the massive government stimulus (Quantitative Easing 2) expires. If the GDP numbers can continue to show growth, I will become much more confident that the economy is actually improving on its own.

Looking Ahead

Egypt will be the major story this week. The question will be how quickly this crisis is resolved and to what outcome. What is certain is that markets will likely be volatile until then.

I have stated that the markets are oversold and have been for some time. We have seen small and mid capitalization companies pull back more this year than the large caps within the DJIA, but all indexes are oversold. Frequently, a global crisis like the one underway in Egypt can be the tipping point for the markets to make a correction after strong run-ups, and this case may be no different so caution must be exercised at this time. However, until my technical indicators signal this change, I will stay the course.

Emerging markets are clearly under stress and if your risk tolerance is low, you should consider trimming your positions at this time. The rest of the market must also be carefully watched for signs of a reversal. The New York Stock Exchange Bullish Percent (NYSEBP) that I discussed last week pulled back just over 1% to 78.30, however, it must move down to 74.33 before a reversal occurs.

Bonds are showing some strength as investors reposition cash from more risky asset classes. For now, high-yield and intermediate term corporate bonds are showing the greatest strength recently.

Commodities remain volatile and gold is clearly under pressure. If gold breaks below $1320, positions will need to be reevaluated. Oil has pulled back to the middle of its 10-week trading range and has support at $85 per barrel. Other commodities are showing strong price appreciation and are contributing to the underlying inflation worries spreading throughout the world. The weakening US dollar is also helping to raise commodity prices and stoking inflation fears abroad.

Going into this week, it is too early to tell how the crisis in Egypt will be resolved. Concerns are heightened and investors will be watching developments closely. The Suez Canal is of paramount important to the flow of free trade and its operation will impact much of what global markets do in this current crisis. Every investor should look at their portfolios and assess your current risk tolerance and decide if changes are appropriate.

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

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

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

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

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

Sincerely,

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

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

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

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

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

US stock markets finished the week mixed as the Dow Jones Industrial Average gained 84 points (+0.72%) to close at 11,872 while the S&P 500 lost 10 points (-0.76%) finishing at 1283, and the Russell 2000 lost 4.26%. The drop in the broader S&P 500 index and the small caps (Russell 2000 Index) marks a break in the recent general outperformance by mid and small cap stocks over larger cap stocks. There is no news that would point to a specific cause of these setbacks last week other than to say that the markets maybe taking a pause after very strong gains. Since the end of the 3rd quarter, 2010, and the close of markets on January 14th, the DJIA was up 9.26%, the S&P 500 up 13.32%, and the Russell 2000 up 19.44%. For the year, the DJIA is now up 2.54%, the S&P 500 is up 2.04%, and the Russell 2000 is down 1.34%.

The top three broad economic sectors last week were Utilities, Consumer Staples, and Real Estate while Materials, Information Technology, and Telecom were the bottom three performers. Of the 11 broad economic sectors I follow, only Utilities and Consumer Staples were positive on an absolute return basis. On a relative strength basis, Real Estate, Consumer Discretionary, and Information Technology continue to lead among the sectors.

The MSCI (EAFE) World Index lost a slight 0.02% for the week reflecting strength in developed Europe while emerging markets continued recent weakness. Last year's weakest countries, Spain and Italy are the best performers so far in 2011 while Indonesia, South Africa, and India have all pulled back significantly. Concerns over a weak US dollar are driving inflation worries in emerging markets and countries may be forced to tighten local monetary policy to temper inflationary concerns dampening economic growth. China has raised lending reserves and the Central Bank of Brazil just raised their key interest rate by 0.50% to 11.25%. Rising food prices in particular are hurting many emerging markets right now. I will be evaluating emerging market positions closely in the coming weeks.

The Euro continued its climb against the US dollar as European debt fears continue to subside. The Euro closed Friday in New York at $1.3615 up another $0.025 pushing the Euro to its highest levels since late October of last year. Part of the recent push has been the added buying by investors who had "shorted" the Euro. Investors sold, or "shorted" the Euro on expectations that the currency would continue to fall. In the face of growing strength, these investors must now buy Euros to close out their positions adding additional momentum behind the Euro's gains.

Commodities were mixed last week. Gold added to the previous week's losses posting a drop of $19.90 (-1.46%) to close late Friday at $1341.00. For the year, gold is now down 5.54%. Gold's relationship with the Euro is telling as the currency gains strength (considered a signal of investors' willingness to assume greater risk); gold and other precious metals lose strength. Oil also pulled back on news of strong supply inventories. Oil (West Texas Intermediate) lost $2.55 (-2.78%) from the previous week's close of $91.22. Food and textile commodities continued to move higher creating concerns over future inflation in many goods.

The 10-year treasury yield rose last week closing Friday at 3.4081% up from the previous week's close of 3.3328%. The Federal Reserve helped stem further increases in the yields by making Treasury bond purchases late in the week. The markets will be watching the tenor of remarks coming from this week's Fed's meeting (the first in 2011), and investors will also be watching how the sale of $99 billion in new Treasuries goes. Corporations issued $10 billion of new bonds adding to supplies in the bond markets, and reports by Moody's and Standard and Poors indicating that the US's AAA bond rating may be at risk if Washington does not get spending under control will continue to weigh on investor's minds.

STOCKS IN FOCUS

We are in the midst of earnings season where US companies are reporting their 4th quarter, 2010, earnings and making announcements of their views regarding 2011. So far the reports have been coming in pretty well and I would expect this to continue. GE had great numbers and helped propel the DJIA last week, but the real news came from Apple and Google announcing major management shakeups. Apple's Steve Jobs has been forced to take another medical leave of absence while Google announced the departure of its current CEO. Both moves raised investor fears and contributed to the drop in both stocks, especially Apple. Apple is the single most widely held stock among institutional investors while Google is the seventh.

THE NEW YORK STOCK EXCHANGE BULLISH PERCENT

The first key indicator I look at on a day-to-day basis is the New York Stock Exchange Bullish Percent (NYSEBP). The NYSEBP is a statistic that gives insight into whether the US stock market is currently gaining strength, losing strength, and how much risk is built in to the market. I have mentioned the NYSEBP before, but I will spend a little more time discussing just how this indicator works.

The NYSEBP looks at the point and figure chart of every stock on the New York Stock Exchange and decides if it is in a buy mode or sell mode (for further explanation of point and figure charting you can find good explanations online or in Tom Dorsey's book, Point & Figure Charting, Third Edition). All buys are added up and divided by the total number of stocks to arrive at a percentage. If the percentage is below 30% the market is considered oversold, and if the percentage is over 70% the market is considered overbought. Additionally, if the momentum of that percentage is upwards, then the market is considered to be on offense and more people are buying stocks than selling. Likewise, if the NYSEBP is losing momentum, than more sellers are in the market and caution should be exercised. The old adage of "a rising tide lifts all boats," describes the value of the NYSEBP. If markets are rising, it is generally possible to make money in stocks, and if the markets are falling, it becomes much more difficult.

Presently, the NYSEBP is at 79.36 with positive momentum. The NYSEBP has been over 70% since October, 18, 2010. The average time the NYSEBP has been over 70% since 1958 is 95 days. We are now at 97 days. While the NYSEBP cannot predict when the indicator will pull back (the longest period was 285 days from June 4, 2003 until March 16, 2004); it can certainly tell us that there is greater risk of a market pause or correction today, and that the tide is certainly high. I will be watching very closely for any reversal in momentum in the NYSEBP and will pass that information on when I do see that.

Looking Ahead

Both the small and mid capitalization segments of the markets were down last week. Their point and figure charts turned to negative momentum and will require further review. Emerging market momentum has also turned negative. As I noted earlier, it not especially surprising after each of these market segments have enjoyed great strength since the fall of 2010; however, the caution lights are flashing.

Bonds continue to be flat and worries of inflation are weighing on bond investors. Heavy supply of bonds of all types may also contribute to weakness in bond prices (raising yields). I believe that for 2011 bond investors can expect more traditional bond-like returns and not the double digit gains seen since we came out of the financial crisis of 2008.

Commodities remain volatile and gold is reaching its long-term support at $1340. If gold breaks below $1340, positions will need to be reevaluated. Oil has pulled back to the middle of its 10-week trading range and has support at $85 per barrel. Other commodities are showing strong price appreciation and are contributing to the underlying inflation worries spreading throughout the world. The weakening US dollar is also helping to raise commodity prices and stoking inflation fears abroad.

The less sensitive indicators found in the Dynamic Asset Level Indicators (DALI) still show US and International stocks to be favored, Emerging Markets favored over Developed, equal-weighted indexes favored over capitalization-weighted, mid and small cap over large cap, and growth over value. Because the DALI is less sensitive than the markets in general, changes, when they occur, are significant.

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

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

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

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

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

Sincerely,

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

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

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

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

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