Markets were subjected to historic volatility this past week as investors reacted to every piece of news crossing the wire.

Following the historic downgrading of the US credit rating by Standard & Poor's, the Dow Jones Industrial Average (DJIA) experienced a first-ever four consecutive days of 400+ point moves leaving the DJIA down 1.53% for the week closing Friday at 11,269.02. The S&P 500 lost 21 points (-1.72%) to finish at 1178.81, and the Russell 2000 gave back another 17 points (-2.40%) closing at 697.50. For the first two weeks of August the DJIA is down 7.20%, the S&P 500 is down 8.78%, and the Russell 2000 is down 12.49%. This same order holds for the year as the DJIA is off 2.66%, the S&P 500 is down 6.27%, and the Russell 2000 is down 10.99%.

Real Estate and Materials were both positive last week while Utilities, Health Care, and Information Technology were down less than 1% and easily outperformed the major indexes. The Financials sector was clearly the worst performing sector losing over 4%. For the year, Consumer Staples, Utilities, Health Care, Real Estate, and Energy have all outperformed the DJIA, with the top three sectors holding onto positive returns for the year. With last week's performance, Financials are now down over 18% for the year and this sector has distanced itself from the next two worst performers (Industrials and Materials) by nearly 8% and 10% respectively.

The MSCI EAFE Index fell a modest 0.97% last week buoyed slightly by news that the European Central Bank (ECB) began purchasing Spanish and Italian bonds to help stabilize European bond markets. This move is akin to the US Federal Reserve buying Treasuries and helped strengthen European bonds. US investors would recognize this effort by the ECB as a variation of our own Quantitative Easing (QE). This move has drawn sharp criticism by many in Europe who see the ECB's role strictly as an inflation fighter. It also underscores how serious the problems within the European credit markets are. Compounding this worry is the general slowdown of European economies which has mirrored our slowdown here.

The Euro has continued moving incrementally up and down against the US dollar. Last week it fell just four-tenths of a cent to close at $1.424. With both the US and Europe sharing its own sets of concerns, investors are not voting one way or the other in favor of either currency.

Gold surged to a record high mid-day on Thursday (August 11th) when the price of gold briefly exceeded $1817 per ounce before pulling back to close on Friday at $1742.60 up $90.80 (5.5%) for the week. Gold is now up $322.90 (22.74%) for the year and is clearly outperforming all other assets so far in 2011. This surge in gold prices clearly signals that investors are looking for safety in an increasingly uncertain world as politicians struggle to counter the growing lack of confidence of leadership the world over (I will discuss this issue further in the next section). Oil prices continued to fall as investors worried about weakening global economies resulting in a drop of $1.50 (-1.73%) per barrel of West Texas Intermediate. WTI Oil closed Friday at $85.38 per barrel.

The Dow Jones UBS Commodity Index, which measures a broad basket of commodities, gained 0.56% last week on the back of surging gold prices. The index is now down 3.55% for the month and is down 3.30% for the year. Grains were given a boost on Friday when the US Agriculture Department cut forecasts for corn production by 4% due to the pervasive heat wave in the Midwest. Volatility is a common aspect of commodity investing and recent gyrations are more typical than not.

Bond markets generally posted gains again last week as US interest rates continued to fall. The 10-year US Treasury rate fell to 2.249% from the previous week's close of 2.798%. For the second week in a row, US Treasuries, including Treasury Inflation Protection Notes (TIPs), extended gains and was the best performing sector in the bond market. High yield bonds continued to sell-off and is now the worst performing sector in the bond market. As investors grow concerned about the economy they tend to withdraw investments in less creditworthy companies pushing down prices and increasing yields which help explains the poor performance of high yield bonds.

STOP THE WORLD--I WANT TO GET OFF!

While most of you probably do not recall the 1961 musical from which this section takes its title, I would guess that after the past three weeks in the markets you have probably had thoughts along this line.

It is easy to be caught up in the moment because recently the moments have been more dramatic than any time since the market crash of 2008, but I want to step back and look at the bigger picture and try to assess why the markets have entered into this period of hyper-volatility.

There are many, many different factors that enter into the investment equation today: European banking problems, Greece, slowing Gross Domestic Product (GDP) growth here and abroad, political gridlock in Washington, debt ceiling debates, the housing crisis, unemployment, and on and on. I believe that many of these issues are really a byproduct of what lies at the heart of the matter and that is the US and global economies have reached their borrowing limits and they are beginning to deleverage. Deleverage is just a fancy way of saying we have too much debt and we have to start paying that debt down. Think about what happens in your household when it is time to pay off some bills. You stop or reduce your discretionary spending so you can free up cash to tackle the bills. When this scenario is repeated in other households around the country, you get economic slowdown. Besides households, governments have also reached the breaking point of too much debt and you are seeing austerity measures being implemented by many governments, especially in Europe, causing growth rates to slow dramatically.

The trouble is that even though you are doing the right thing economically and for the long-term, you are creating problems today. These are the problems that make the headlines today like high unemployment, slowing GDPs, and an unresponsive housing market. Now this is where it gets dicey. We expect our political leaders to help get us through this cycle of deleveraging with the least amount of pain possible. But are they up to the task? Do we have the confidence that these politicians and government officials, both here and abroad, will be able to create sound monetary and fiscal policies that work, which are coordinated with the rest of the major global economies, and prevent a second economic crisis from returning with potentially greater economic harm? Answering this question correctly will direct your investment decisions for now and into the months ahead.

LOOKING AHEAD

I continue to stress the importance of paying attention to two key indicators: the yield on the 10-year US Treasury note and the price of gold to help look for answers. The 10-year yield tells you the general consensus that investors have on the strength of the US economy, while the price of gold indicates investor confidence in our political leaders to solve and evolve a restructured economic future. Right now the votes are negative in both cases.

Buyers did re-enter the markets on Thursday and Friday offering some hope that investors still have confidence in selected areas within markets, and I am certainly looking for bargains as well. But I believe you must be focused on what you are buying and recognize that risk in the market remains. Because of that risk, I will repeat last week's observation that if you are not comfortable with the volatility and uncertainty in the market, you can increase your allocation to cash and be patient. The worst aspect of holding cash in the near-term is that you may miss some of the upside if the market does rebound; but if the markets resume their downward fall, you will preserve your assets.

Among the five major asset classes I follow: US Equities, International Equities, Bonds, Foreign Currencies, and Commodities; International Equities has fallen from third to fifth place reinforcing my opinion that International Equities should be avoided or trimmed from portfolios. The rise in Foreign Currencies to third place is a noteworthy trend since this asset category has been in the fifth and last position for several years. I will be carefully evaluating this category and may offer some investment ideas next week if I find some compelling opportunities. While Commodities and US Equities still hold the first and second positions, they fail what I call the cash bogey check. When an investment fails the cash bogey check it means that cash has a stronger relative strength ranking than the asset category sending me a clear signal to increase cash in my portfolios.

With the recent market sensitivity to news stories, there are a couple of key things to watch for in the coming week:

French President Sarkozy will meet with German Chancellor Merkel in Paris on Tuesday to discuss the deepening concern that debt problems may be spreading to Italy. As the leader of the Euro Zones strongest economy, Merkel is under tremendous pressure to work out a solution without committing German taxpayers to subsidizing all of southern Europe's free-spending governments. Compounding the challenges, France's economic growth was 0% in the second quarter and industrial output is falling across Europe.

On Tuesday morning, Housing Starts and Industrial Production data will be released followed by Thursday morning's releases which will include weekly first time Jobless Claims, the Consumer Price Index, and Existing Home Sales. All eyes will be focused on indications of economic growth or further slowdowns.

The tug of war between bulls and bears will likely continue this week but it is hard to imagine that the extreme swings we observed in the market last week will be repeated. Please reach out to me if you have any questions or comments about your portfolios or the markets in general.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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

US and global stock markets saw a second consecutive week of sell-offs as investors digested the details of the debt ceiling compromise, poor economic data, and Europe's continued struggles to contain Greece's debt crisis. All major stock indexes are now trading in negative territory for the year. Additionally, there have been major changes to the technical indicators I follow.

After markets closed on Friday, Standard & Poor's downgraded the US's AAA rating to AA+. This may have serious consequences for investors in the coming weeks.

The Dow Jones Industrial Average (DJIA) lost 699 points (-5.75%), the S&P 500 shed 93 points (-7.19%), and the Russell 2000 lost 82 points (-10.34%). These losses surpassed last week's year-worst data and then some. Thursday's major sell-off was the worst one-day drop by the S&P 500 (-4.78%) since April 29, 2009's 4.32% drop. For the year, the DJIA is now down 1.15 %, the S&P 500 is down 4.63%, and the Russell 2000 is down 8.81%.

Every sector was down again last week. Consumer Staples was the best performing sector losing just under 3% followed by Utilities and Telecom. Real Estate, Energy and Materials were the worst all losing between 10% and 12%. For the year, Consumer Staples, Utilities, Health Care, and Energy are top performing sectors and remain positive for 2011.

International markets followed US markets with significant sell-offs. The MSCI EAFE Index dropped 9.92% and is now down 8.75% for the year. No region of the world was spared the sell-off, but Europe was by far the poorest regional performer with losses averaging around 11%. It is not certain that the European Union will in fact contain Greece's debt crisis and prevent its spread to Spain and Italy.

The Euro has been moving in incrementally up and down against the US dollar. Last week it fell just over a penny to close at $1.428 and is up nine cents for the year. The real action has been the Japanese Yen which has risen to the point that the Japanese government sold Yen to keep that currency from rising too much and hurting that countries critical export trade. I am not terribly impressed with most of the world's major currencies as they have all been moving down more or less together.

Gold continued to be the investment of last resort as it posted a $20.80 (1.28%) gain to close the week at $1651.80, and this precious metal is now up 16.35% for the year. Oil pulled back dramatically losing $8.98 (-9.367%) per barrel reflecting serious concerns over the strength of the global economy. Oil investors are worried about the strength of the global economy pushing demand down, and as the US dollar has strengthened recently, this has added an additional headwind to this and other commodities.

The Dow Jones UBS Commodity Index, which measures a broad basket of equities, fell 4.09% last week and is now down 3.84% for the year. This index is heavily weighted in energy and precious metals with oil being the primary cause of the pullback, however, other economically sensitive commodities such as copper will also feel the pressures of a weakening global market cycle.

The bond markets gained last week as investors looked for a place to hide as stock markets sold off. This is an important and positive sign because the bond market is functioning normally as compared to 2008. The Barclays Aggregate US Bond Index gained a solid 0.82% following last week's gain of 0.71%. For the year, the Barclays is up 5.52%. The 10-year US Treasury yield fell substantially to 2.566% at close on Friday which marks the lowest close since early November 2010. The real question will be what will happen to bond yields in light of S&P's US debt downgrade. The best performing bonds were the more volatile longer-term maturities while high yield and preferreds were the worst.

THE MARKETS ARE IN CORRECTION MODE

Following the past two weeks, virtually every stock market is now in corrective mode (greater than a 10% drop from recent highs). The reasons for this are numerous and I have discussed all of these issues in detail over the past weeks and months. At the core of all of this is a US economy

that simply is not growing. Overlay this with the debate in Washington about the growing US debt burden and Europe's turmoil as it struggles with fears that Spain and Italy are now at risk with bond investors, and you have a real mess. As if this is not enough to worry investors, Standard & Poor's announced on Friday evening that they were cutting the US debt rating one notch from the coveted AAA to AA+ (same as Spain and China).

Beyond the highly visible and significant selloff in markets, there has been a major change to my technical indicators. As I begin this discussion of the technicals, please keep in mind that these technicals are price-based and I assume that every bit of critical information about a stock or a market is reflected in the price. There are five major asset classes which I follow: US stocks, International stocks, Commodities, Bonds, and Currencies. I rank these asset categories from top to bottom and then evaluate each category with its relative performance against cash. The current order of the asset classes is: Commodities, US stocks, International stocks, Currencies, and Bonds. This order has not changed recently, however, last week each of the top three categories are now failing the relative strength test against cash.

What this means to you is that if you are risk adverse, meaning that you are very uncomfortable losing money, you should consider selling or reducing your stock holdings in these top three categories. If you are risk tolerant, you may consider maintaining your investments for now. Each investor is different and you should make decisions based on your individual risk tolerance and other factors such as tax gains or losses.

LOOKING AHEAD

The talking heads are all a-twitter with the current turmoil in the markets. If you are watching or reading the many stories in the media you are probably shaking your head about how so many people can have so many different opinions about why the markets are selling off and what you should do with your money. Let me begin this Looking Ahead segment saying as I have many times: I do not know what the markets are going to do tomorrow or this week, or even next month. What I do know is what my technical indicators are seeing in the markets' behavior.

Let me use an example to help explain why I look at my technical data to interpret what is happening in the markets and why I consider the opinions of others to be of secondary importance. One of the greatest American physicists, Richard Feynmen once said, "The first principle is that you must not fool yourself, and you are the easiest person to fool." He was admonishing his fellow scientists to not permit their personal expectations/biases from influencing their interpretations of data resulting in incorrect conclusions. This personal bias is also referred to as cognitive bias-when we look for evidence that confirms our existing opinion, and tend to ignore, dismiss, or refuse to look for evidence that would contradict what we already believe. Personal bias can also be heavily influenced by recent events-think 2008. Market prices provide great insight into the underlying reality. If markets are not doing what you think they should, the market is probably right and you are probably letting confirmation bias fool you. (Prices reflect the current expectations around a situation-not necessarily the correct expectations. If circumstances cause expectations to change, you can expect that market prices could have quite an adjustment too.)

With a lot of smart people wagering significant sums of money on outcomes, prices are often our best guide to the probable future. Prices are going to reflect reality as best it can be determined. So my focus is always on the price movements of stocks, bonds, and asset categories, not what some talking head is saying in the media.

As I prepare this Weekly Update late on Sunday evening (August 7th) Asian markets have opened to the downside and US stock futures are reflecting a lower opening. It is impossible to tell what will actually happen this coming week. It does not look good for the start of the week, but it is hard to say if this selling pressure will continue or abate. My techncials suggest that risk is high and caution is appropriate at this point in time.

Gold prices are soaring to nearly $1700 an ounce indicating the level of uncertainty in the markets. Through Friday, the 10-year US Treasury yield was pushing down to near record lows. Unemployment numbers remain unacceptable and there are signs that consumer spending is weakening. Taken together, this data is suggesting that the economy is in for a continued rough patch. I believe the real wild card here could be the intervention by the Federal Reserve. The Fed's Open Market Committee meets this coming week and they could follow that with some sort of an announcement that might move markets. The Chairman, Mr. Bernanke, is also speaking at the Fed's annual Jackson Hole conference where he could suggest new policies much as he did last year when he unveiled Quantitative Easing II (QE II) that gave the markets a shot in the arm. Unfortunately, there are fewer options available to Mr. Bernanke than last year.

So if you have not reviewed your portfolio do so with a critical eye. If you are uncomfortable, make some adjustments.

I continue to prefer Commodities and US stocks with an understanding that cash is outperforming on a relative strength basis in the near-term. I am avoiding international stocks except for the strongest technical positions. I continue to like US corporate and international bonds, and commodities are outperforming most other investments on a relative basis. With US Treasury yields continuing at record lows, this suggests that the US Treasury market is not going to suddenly sell-off even in light of the S&P downgrade.

Volatility is likely to continue into this week. This is the sign of markets that are uncertain about what is happening.

These continue to be challenging times. The markets are very concerned about many issues with outcomes undetermined. Looking back in history, it is akin to the weeks following Pearl Harbor...the news was terrible, there was no strategy in place to deal with all the events happening around the world, and Americans were realizing that there would be many sacrifices ahead before normality would return. Today we need a coherent strategy. We need to look at events and figure out how to deal with how we go forward, not playing blame games on why we are here. And we need leadership from the White House, Congress, and business to come together to get this economy going.

Whatever happens, you must take action and have a strategy to invest in these difficult times even if our national leaders do not. I believe that following the tenets of point and figure charting and relative strength analysis give you the tools necessary to develop that coherent strategy necessary to move forward if you are not already using them with me.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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

Markets here and abroad sold off this past week on news of the continued political stand-off in Washington and the absolutely terrible US Gross Domestic Product (GDP) data.

For the week, the Dow Jones Industrial Average (DJIA) lost 538 points (-4.24%), the S&P 500 shed 53 points (-3.92%), and the Russell 2000 retreated 45 points (-5.32%). These losses were the worst one week drops so far in 2011 for each respective index. For the month of July, the DJIA finished down 2.27%, the S&P 500 was down 2.15%, and the Russell 2000 was down 3.67%. For the year, each of these major indexes is positive with the DJIA leading gaining 4.89%, the S&P 500 is up 2.75%, and the Russell 2000 is up 1.71%. Since the end of the February, the markets have generally drifted downward with increasing volatility.

Every sector was down last week. The Utilities sector was the best performer losing just over 2% followed by Consumer Staples and Real Estate. Industrials was the worst performing sector losing over 6% followed by Health Care, and Telecom. For 2011 the top three performing sectors are Energy, Real Estate, and Health Care. The bottom three are Financials, Industrials, and Materials. The Financial sector is leading all sectors to the downside with a loss of over 5%.

International markets were also down but not as severely as US markets. The MSCI EAFE Index dropped 1.46% for the week and is up 1.3% for the year. Persistent worries about the continued spread of the debt crisis beyond Greece's borders to nearby Italy and Spain continue to weigh on European markets. The performance gap between developed markets and emerging markets remains fairly narrow with about a 2% differential favoring developed markets.

The Euro added less than a penny against the US dollar last week to close at $1.440. For the month the Euro lost one cent and for the year is up just over ten cents (7.71%). The Japanese Yen and Swiss Franc have been the primary beneficiaries of investors leaving the US dollar and Euro over the growing uncertainty in the US and Europe with the Yen and Franc gaining 12% and 33% respectively against the US dollar in the past 12-months.

Gold gained $28.30 (1.77%) last week to close at $1631.00 which completes a nearly 9% rise in price for July and a 14.88% increase for 2011. The increase in gold prices reflects the uncertainty swirling in the markets. Simply put, the greater the uncertainty, the higher the price of gold. I use gold prices as my primary barometer to gauge fear and uncertainty in global markets.

WTI oil dropped $3.85 (-3.86%) per barrel but remains up $0.44 (0.46%) for the month of July and up $4.64 (5.09%) for the year closing Friday at $95.86. Oil prices tend to reflect anticipated supply and demand views by investors and with the US GDP numbers so poor, the markets are anticipating a drop in demand for now. One interesting fact to the contrary was reported this weekend in The Wall Street Journal whichwas that the number of fully loaded oil tankers in the US Gulf of Mexico has increased dramatically recently suggesting that the owners believe the price of oil will continue upwards after the Strategic Petroleum Reserve release has moved through the market. By holding oil in tankers offshore , the owners are betting that by delaying delivery of the physical oil will get them a better price even considering the costs of holding a ship and crew at anchor offshore.

The Dow Jones UBS Commodity Index measuring a broad basket of commodities was down 1.49% for the week but was up 2.96% for July. Oil had the most downward influence on the Dow Jones UBS Commodity Index last week which was partially offset by precious metals.

The bond markets have remained subdued during the frenzy of political debates in Washington. The Barclays Aggregate US Bond Index gained 0.71% last week and is now up 4.65% for the year. The 10-year US Treasury fell to 2.798% on Friday reflecting a more negative economic outlook in the US, not a fear of default. With the rather strong drop in US Treasury yields, longer-term Treasuries were the best performing part of the bond market. Treasury Inflation Protection Notes (TIPs) were also one of the strongest performing sectors. Preferreds and high yield bonds were the worst performers.

ARE WE FOCUSED ON THE CORRECT PROBLEM?

The 24-hour news cycle has been reporting on the debt ceiling "crisis" non-stop this past week. I think every senator and representative in Congress has been interviewed at least once on TV this week and the talking heads are debating how severe the market turmoil will be if an agreement is not reached. Let me suggest to you that the more substantial problem is the abysmal performance of the US economy not what Washington does about the current debt ceiling negotiations.

In case you missed the report (and it would have been easy given how little coverage there was in the news), the first report of the 2nd Quarter GDP came in a 1.3% and the 1st Quarter GDP growth was revised downward from 1.9% to 0.4%. Even the most bearish forecasters did not see this coming. When you couple this with a 9.2% unemployment rate, the market reaction was predictable. I am not suggesting that the debate in Congress is not important, I think it is; however, the bond market has been signaling that all of this kabuki theater in Washington is much ado about nothing. The interest rate on the 10-year US Treasury is trading at the lowest level in 2011 which is not the behavior of investors you would expect if they were anticipating impending crisis. Compare our 10-year rate to Greece's 14.97% (as of market close on Friday); those are bonds that are priced for default.

The news early Sunday evening (July 31st) suggests that progress is being made on a debt ceiling compromise with, predictably, lots of complaining from both sides. The markets will undoubtedly respond positively upon the news on Monday, but do not lose focus on the bigger economic picture. And this is where our attention should be. The voters will decide in 2012 about how they want this country to move in the future, but investors are looking at the health of the economy and determining if companies are properly priced given their outlook.

LOOKING AHEAD

A debt deal is likely to come forward and will continue to occupy most of the media's attention as they try to determine who won and who lost the political battle. Investors will look at the deal and decide if it is meaningful and actually cuts spending or if it is just more of same rubbish that has been the hallmark of our Washington politicians in the past quarter century. So stay focused on the gold and bond markets. They will tell you what investors think.

Gold has risen to record highs as investors worry about many governments' abilities to manage their finances. How much, if any, of a pull back in the price of gold will signal confidence in political deal making and discipline both here and abroad. US Treasuries will focus not just on the debt ceiling debate, but on the strength of the economy.

There are two key economic reports due out this coming week. On Monday is the release of the ISM Manufacturing data and Thursday is the weekly Jobless Claims report. I highlight these two reports because they reflect the degree of growth prospects for the economy.

Looking at my technical analysis, I sound much like a broken record. Small and mid-capitalization stocks are preferred over large, equal-weighted indexes over capitalization weighted. US stocks and commodities are preferred over international stocks. Bonds are not favored; however, they have delivered steady returns in what is becoming an increasingly volatile year. My sector analysis has likewise not changed. Energy and Health Care are preferred along with Consumer Noncyclical. I continue to avoid the Financial sector.

Within Commodities I continue to favor Precious Metals and Energy.

Within the bond category I prefer US corporates and international. Treasury Inflation Protection Notes are also favored.

Volatility has returned to the markets. After many gyrations over the past several months, we have essentially moved sideways. You may be questioning why I have consistently favored small and mid-capitalization stocks over large caps even as the DJIA has outperformed the Russell 2000 in 2011. The answer is time horizon. Over the past 12-months the Russell 2000 is up 22.5% compared to the DJIA which is up 16.0%. It will require more than a short-term move in the markets before I make a change to my guidance.

These are challenging times and I share your concerns over what is happening here and abroad; however, I firmly believe that having the proper tools to help guide you through these times is more necessary than ever.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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

US and global markets posted strong gains this past week on news that the European Union had settled on a plan to deal with Greece's debt crisis and a continued expectation that US political leaders would reach some agreement before the August 2 debt ceiling increase deadline.

For the week, the Dow Jones Industrial Average (DJIA) gained 201 points (1.61%), the S&P 500 added 29 points (2.19%), and the Russell 2000 increased 13 points (1.57%) moving all of the major indexes solidly into positive territory for July. For the year the DJIA is up 9.53%, the S&P 500 is up 6.95%, and the Russell 2000 is up 7.42%. The NASDAQ, a technology heavy index that I have rarely discussed recently, posted a weekly gain of 2.47% to beat all the major indexes and moved it nearly 1% higher than the S&P 500 so far in 2011.

Every sector was positive last week except for Telecom with Energy, Information Technology, Real Estate, Financials, Materials, and Consumer Discretionary exceeding the DJIA's weekly return. Financials finished fourth last week on the news of Europe's announcement that a deal had been reached in regarding Greece. I will discuss this further in the next session. For the year, however, Financials still remain in negative territory. Energy, Health Care, and Real Estate remain firmly as the top three sectors so far in 2011 while Financials, Materials, and Industrials are the bottom three performers.

International markets responded positively to news that an agreement had been reached in dealing with Greece for now. The MSCI (EAFE) index gained 2.62% for the week making it the best week for this broad international index since April 8. For the week, developed countries led all major asset class returns and beat emerging markets by over 1%. For 2011 developed countries have outperformed emerging markets, but both significantly trail US equities and commodities.

The news on Greece carried over to the Euro which strengthened two cents against the US dollar to close the week at $1.436. The NYCE US Dollar Index, which is heavily Euro-weighted, has remained in a negative trend now since June 2010 but rebounded very slightly on Friday as investors still remain wary of the European Union's (EU) ability to extricate themselves from their on-going debt problems.

Commodities continued to rebound in July especially in gold and silver. For the week, gold added $12.60 (0.79%) an ounce to close at $1602.70 and is now up 6.65% for the month and 12.89% for the year. The Dow Jones UBS Commodity Index, a broad basket commodity index, was up 0.47% for the week and is now up 1.78% for the year. Not making the headlines has been the pullback of cotton which is now down 18% in July and has turned negative (-16.7%) for the year. Other commodity movers in July are Sugar (20.2%), Silver (15.5%), and Grains (15.5%) while Coffee (-8.7%) and Timber (-2.8%) join cotton as the bottom performers. WTI Oil added $2.47 to close the week at $97.71 and is now up 9.31% for the year. At one point last week, WTI reached $100 put pulled back. While there is no immediate plan to dip again into the Strategic Oil Reserves, if oil prices continue to rise, there may be another release which will hold oil prices down. A strengthening US dollar will also have a negative impact on oil and commodity prices in general.

The bond markets have been tame leading into the potential debt ceiling deadline of August 2nd. The Barclays US Bond Index fell just 0.07% last week and the 10-year Treasury yield climbed slightly to close the week at 2.958% up from last Friday's close of 2.905%. International Treasuries and US High Yield bonds were the best performers for the week while longer-term and intermediate term US Treasuries were the worst.

DEBT HERE AND ABROAD

The negotiations taking place in Washington and Brussels dominated the financial headlines this past week. Slipping under the radar was another terrible jobs report which showed first time unemployment numbers coming in at 418,000. The markets were helped by above expectations earning announcements (except for Caterpillar), and a belief that earnings announcements in the coming weeks will continue to be positive.

The Europeans announced on Thursday that they had reached a broad compromise on Greece's crisis by committing to a second outright bailout of €109 billion ($156.5 billion), an expansion of the European bailout fund and uses of that fund, private sector participation, and a reluctant concurrence from the European Central Bank (ECB). Everyone got a little and gave a little in this agreement. For Germany, this means opening up their treasury to continue funding the debt problems of Greece in return for private bond holders absorbing some of the losses on bonds as they are restructured. This means that Greece will enter into a "technical default" for the bonds that are rolled over into new bonds at extended maturities (15 and 30 years) at below market valuations and coupons. The amount of losses incurred by private lenders will be dependent on the type of bonds they agree to accept. Additionally, the European bailout fund may now be used in advance of other country's problems in an effort to avoid a crisis situation including providing capitalization for troubled banks. The ultimate test of this deal will be whether or not Greece can return to a growing economy capable of sustaining itself.

Here in the United States, the assumption that Congress and the President will be able to find some agreement to stem a potential default on August 2nd is coming under increasing doubt. I will not get into the details of these discussions or whether or not the US will actually default on its obligations if an agreement is not reached, but clearly the markets will not be comfortable if no deal is reached. I am writing this update late on Sunday afternoon and Asian markets have not started trading, nor have US stock futures, so it is difficult to say just how impactful the debt negation impasse that emerged Friday evening will have on the markets. I will say that if Moody's, Standard & Poor's and Fitch Rating Services do go ahead and downgrade the US credit rating it will have a significant impact on markets and may also have ramifications on the many states, municipalities, pension funds, banks, and insurance companies that hold large quantities of US debt.

LOOKING AHEAD

The debt ceiling negotiations will continue to dominate headlines. I cannot imagine that the markets will not be at least a little spooked by what is happening in Washington. In addition to this important issue, the first estimate of the US 2nd Quarter Gross Domestic Product (GDP) will be released on Friday at 9:30 AM. Preceding this critical piece of information will be releases of the Consumer Confidence Index and New Home Sales (Tuesday morning) and Thursday's release of Initial Jobless Claims. If these numbers are poor (which they are expected to be) combined with uncertain debt ceiling negotiations, it may be a tough week in the markets. Offsetting this negative trend is the expected strength of US corporate earnings announcements which will peak this week for the 2nd Quarter. Strong earnings by most corporations have, and will expect, to help offset the broader economic concerns in investor's minds.

The technical analysis of the markets has been unchanged for some time now. US Stocks and Commodities remain the favored asset classes followed by International Stocks, Foreign Currencies, Bonds, and Cash. Within US Stocks, small and mid-capitalization stocks are favored, growth is favored over value, and equal-weighted indexing is favored over capitalization-weighted indexing.

My sector analysis has likewise not changed. Energy and Health Care are preferred along with Consumer Noncyclical. I continue to avoid the Financial sector.

Within Commodities I continue to favor Precious Metals and Energy.

The International Sector showed some improvement last week and may continue to rebound on the news about the Greek bailout, however, from a technical basis, this sector is not favored and investments here should be carefully evaluated and only the strongest technical investments should be held. From a longer-term perspective, I prefer Emerging Markets over Developed Markets.

Generally bonds have remained a good place to hold cash. I prefer US corporate bonds and International bonds. US Treasury Inflation Protection notes have performed well and I like this as a hedge against the risk of rising interest rates.

While some doubts have been eased in Europe, uncertainty here at home continues to rise. Gold prices reflect investor uncertainty. I will be monitoring events here and abroad closely, and will communicate with my clients as needed.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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

US and global markets sagged under the weight of the European debt crisis and the fiscal uncertainty here at home.

The Dow Jones Industrial Average (DJIA) lost 177 points (-1.40%) last week as the S&P 500 gave back 28 points (-2.06%) and the Russell 2000 fell 24 points (-2.79%) pushing July returns back to near zero indicating that markets are struggling to digest and trade on the uneven news coming from Washington in the form of the debt ceiling debate and continued weak economic news. For the year the DJIA is up 7.79%, the S&P 500 is up 4.65%, and the Russell 2000 is up 5.76%.

Turning to specific sectors, only the Energy sector posted a positive gain of approximately 0.40% last week with the best performance found in the exploration and production sub-sector. Utilities and Consumer Staples outperformed the DJIA followed closely by Health Care. Financials, Industrials, and Telecom were the bottom three performers for the week. For the year, Energy, Health Care, and Real Estate lead while Financials, Information Technology, and Materials rank as the bottom three. Beyond the strong performance of the Energy, Health Care, and Real Estate sectors, every other of the eight remaining sectors (except Financials) have performed adequately and have not been a drag on portfolios. Financials continue to perform very poorly and I continue to avoid this sector completely.

International markets continue to struggle. The MSCI (EAFE) index was down 2.71% last week and is up just 0.17% for the year. On a regional basis, Europe has underperformed so far in July with Greece, Portugal, Italy, Spain, and France holding five of the bottom six positions globally for the month of July. Europe owns the bottom 14 country spots (out of 64 that I follow) so far in July as investors express doubts about the financial health of this region. Asia continues to lead building on early momentum this month. For the year, the United States ranks a respectable 17th out of 64 countries. Among the BRIC countries, Brazil, Russia, China, and India, only Russia is solidly positive for the year while China is off nearly 3% and Brazil and India are each of about 9%. This underperformance highlights the challenges that emerging markets have had this year coping with surging commodity prices and local inflation. Most emerging market governments have had to implement policies to curb economic growth to fight inflation and this in turn has hurt equity markets.

The US dollar weakened slightly and the Euro also gave back about a penny closing last week at $1.416. The US dollar has been on a generally positive trend since mid-April and this has helped hold back commodity prices, however, recently the US dollar has shown weakness especially after Fed Chairman Bernanke expressed his support for low interest rates and indicated a willingness to step in with another round of bond purchases (QE III) should conditions warrant.

Commodities have been bolstered this month by a surge in gold prices of nearly 6% in July along with almost a 2% increase in oil prices. Gold jumped $48.50 an ounce (3.15%) last week to close on Friday at $1590.10. WTI Oil added $1.04 per barrel to close Friday at $97.24. The impact of new supply provided by the Strategic Oil Reserve has done little to curb prices. Gold prices reflect uncertainty in investors minds while oil prices indicate a combination of demand and currency movements. The Dow Jones UBS Commodity Index has gained 2.8% for the week on the strength of precious metals (silver has also been performing well recently) and is now up 1.30% for the year.

The Barclays Aggregate Bond Index had its best weekly performance (+0.97%) so far in 2011 as investors continue to see a mountain of sub-par economic data, a continued accommodative Fed, and a firm belief that Washington will not default on its obligations. For the year, the Barclays is now up 3.99%. The 10-year Treasury yield closed Friday at 2.905% which is off lows reached earlier in the week. Longer duration bonds and inflation protection notes (TIPs) were among the best performers while International, preferreds, and high yield bonds were the worst. For the year, International, municipals, and TIPs have been the best performing general category of bonds while very short-term treasuries have been the worst.

UNCERTAINTY MOUNTS

For those of you who have been reading my Update regularly you know that I have consistently said that the price of gold is a measure of uncertainty in the markets. Looking across the global landscape one only sees uncertainty and worry. Uncertainty and worry are not new to financial markets, just look at American history over the past 100 years. This country has fought two world wars, numerous smaller conflicts, survived the Great Depression, an unprecedented oil embargo, and a cowardly terrorist attack on our nation. We have lived under the cloud of nuclear annihilation for nearly 70 years and yet the United States and world economy has expanded. So a little perspective helps now.

We are, however, confronting what I believe to be the crisis of our lifetimes. Spending and debt are at record levels in nearly all of the developed countries not just here. I recently saw a chart in the Wall Street Journal that illustrated US debt as a percentage of Gross Domestic Product (GDP). The chart shows that in the history of this country, we are at levels seen only during World War II when debt to GDP exceeded 100%. What the chart also shows is that the nation's debt was cut drastically in the years immediately following the war when 12 million servicemen and women were discharged from the military and military budgets were slashed. Looking forward from here, there is no such option. We cannot "discharge" the millions and millions of Americans living on social security or using Medicare. These numbers are only going to grow.

Europe is confronting an economic system that can only be described as flawed. Germany, France, and the Netherlands are supporting the spendthrift countries found in the southern regions of Europe. Reports that politicians are at least acknowledging that Greece has no chance of repaying its debt is helping reshape discussions to a more realistic outcome. For the first time leaders are looking at more than just kicking the can down the road.

A recent editorial on Bloomberg.com by Carmen Reinhart and Kenneth Rogoff (Too Much Debt Means the Economy Can't Grow: Reinhart and Rogoff) postulated that if debt to GDP ratio exceeds 90%, countries are increasingly unlikely to be capable of growing their way out of debt and suffer slow growth until the debt is retired either through default or inflation. The article also discusses that in developed countries, interest can rates remain relatively low as governments use financial repression to help pay off debt (interest rates are below real rates of growth). They also point out that higher interest rates generally do not signal a problem until very late in the game if at all. Japan continues to be the most recent example of this.

So how does this information translate to gold at $1600 per ounce? It signals a lack of confidence. A lack of confidence that the US political leadership will be able to lead our nation to a sustainable conclusion of the current debt burdens, that the Europeans will continue to struggle with unruly member nations, and that it is better to hold a tangible asset than the paper promises of countries that are growing increasingly fiscally unsound. So as you try to make sense of all of the macro economic data that is discussed in the media, just watch the price of gold and the rate on the US 10-year Treasury note. High gold prices and low interest rates signal pessimism while lower gold prices and higher interest rates would signal optimism.

LOOKING AHEAD

Last week's economic data was not good. First time unemployment claims remained above 400,000, consumer confidence is at very low levels, industrial output is anemic, and inflation is a little better but creeping upwards. Yet the DJIA is up over 9%, the United States is outperforming most countries around the world, and corporate earnings continue to come in strong.

US Stocks remained favored over Commodities, International Stocks, Bonds, and Currencies. Commodities, International Stocks, Bonds, and Currencies is trending weaker while US stocks continue to hold. Stocks are still favored over bonds, small and mid-capitalization stocks favored over large. Growth over value, and equal-weighted indexes over capitalization-weighted. Large capitalization stocks have shown signs of life and while I continue to prefer small and mid-capitalization stocks, I believe that large growth stocks will not be a drag on portfolio returns.

I maintain my comments about sectors. While I have no significant preference within the various broad economic sectors other than avoiding Financials, I am concentrating more on Health Care, Consumer Staples, Real Estate, and Energy. Utilities have proven to be a good bond-alternative option within the equity space.

International investments should be carefully considered. The strength around the world has been weak at best and any holdings should be evaluated with only the strongest technical holdings kept in the portfolio. From a relative strength basis, I continue to prefer Emerging Markets over Developed Markets.

Commodities have rebounded recently. Gold and silver are especially strong. Oil remains in a negative trend so I am less committed to oil in the near-term than I have been; however, I read a recent observation in the Wall Street Journal that said oil will win regardless of what the economy does. If economies falter, the Fed is likely to maintain a weak dollar policy (favors commodities) and if the economy strengthens demand will grow favoring oil. I am not initiating new positions in oil at this time, but I am not pushing to sell existing ones for now. Please keep in mind that commodities is a highly volatile asset class and entering positions in this category should be done so with the understanding that you are likely to experience greater volatility than with many other investments.

Bonds have been a stable investment so far in 2011. With the pullback late in June, bonds are not nearly as overbought as they had been and I believe remain attractive for now. I prefer high quality corporates, emerging market debt, and TIPs.

All eyes will remain on Washington and Brussels as the US and Europe will be working on their debt problems. Based upon US interest rates and the strength of the Euro, investors believe resolutions are coming; however, the rising price of gold show that they are hedging their bets!

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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

Markets have been moving sharply since my last update. The last week in June saw all US major indexes surge over 5% followed by a leveling off last week. The extremely poor US employment report released on July 8th will weigh heavily on investors minds going into the new week. Europe has released additional funds to help Greece meet its most immediate needs, but a sharp sell-off in Italy on Friday has raised new worries about the strength of Europe. China's inflation rate reach 6.4% causing worries about forcing the government there to further reign in growth, and US politicians seem increasingly unable to reach a long-term compromise on US spending and tax reforms.

So far in the month of July, the Dow Jones Industrial Average (DJIA) has gained 243 points (2.03%) to close at 12,657 and the S&P 500 has gained 3 points (-0.24%) to close at 1344. The Russell 2000, an indicator of smaller capitalization stocks, posted a solid gain of 3.04%. For the year the DJIA is now up 9.33%, the S&P 500 is up 6.85%, and the Russell 2000 is up 8.97%.

Sector returns in July have seen a significant improvement in the Information Technology sector and continued strong performance in Real Estate. In addition, Consumer Discretionary, Materials, and Energy all bested the DJIA while Utilities, Health Care, and Financials are the bottom three performers. For the year, Health Care, Real Estate, Energy, Consumer Discretionary, Consumer Staples and Telecom have all posted double-digit gains and are ahead of the DJIA. Only Financials have significantly underperformed the main indexes and remains negative for the year.

International markets have not shared in the strong performance seen here in the US recently. The MSCI (EAFE) index is down 0.73% for the month and is up just 2.96% for the year. Developed Europe has seen strong sell-offs so far in July with the deficit crisis still dominating investors concerns. Italy, Spain, Greece, and Portugal are four of the five worst performing countries in July while strength has emerged in Asia with good returns in Thailand, South Korea, and the Philippines. Just over halfway through the year, Emerging European countries hold most of top spots of my list of countries while the Middle East owns the majority of bottom performers. Developed countries in general are outperforming emerging markets.

Commodities have been bolstered this month by a surge in gold prices. Gold has jumped $38.80 an ounce (2.58%) since the start of the month helped by a $59 gain just this past week to close on Friday at $1541.60. Clearly concerns about political and economic turmoil both here in the US and in Europe have contributed to gold's recent gains. Oil has increased $0.78 in July to close at $96.20 and is now up $4.98 (5.46%) for the year. Oil did see a drop of over $2 per barrel on Friday following the release of week jobs data here in the US. The Dow Jones UBS Commodity Index has gained 1.7% in July primarily on the strength of precious metals but remains down about 1% for the year.

Bonds suffered during the gains in equity markets the end of June but rallied significantly in the last couple of days. The 10-year Treasury yield closed Friday at 3.022% reflecting investor concerns over the strength of the US recovery while short duration bonds have underperformed so far in July. The Barclays Aggregate Bond Index is now up just under 3% for the year.

WHERE OH WHERE ARE THE JOBS?

The US unemployment rate jumped to 9.2% in June with only 18,000 jobs being added. Additionally, May's figure was revised downward to 25,000 from a previously reported gain of 55,000. There was no good news in the report anywhere and has raised serious concerns about the strength of the US economy going into the second half of 2011. If you factor in those workers who just quit working, the jobless rate goes to 11%. The best spin that can be put on this dreadful number is that unemployment has traditionally been a lagging economic indicator and that supply disruptions coming from Japan will be lessened as that country rapidly comes out of the stresses caused by the earthquake and tsunami. Manufacturing is still growing slightly and may improve if parts from Japan arrive here in pre-quake quantities.

The challenge is that employers are not going to start hiring more workers unless there is more economic activity, but economic activity will not improve without more people working and willing to spend. The drop in oil prices will help, but not unless the price of oil falls well below current levels. The White House blamed the ongoing debt ceiling impasse for employer unwillingness to hire, but in my opinion that is simply trying to make a bad day less bad. The markets, in my opinion, have already priced in that Congress will raise the debt ceiling and that the US will not default on its debt, so a favorable solution to this uncertainty will help, but I am not sure if it will enough to turn around employment numbers in a meaningful way.

Pressure is mounting on the Federal Reserve to do more than just keeping interest rates low, but so far, Chairman Bernanke has not shown much willingness to start buying more bonds (Quantitative Easing III). Economists will now begin to relook their 2011 growth projections and I would expect to see growth estimates drop to under 3% if for no other reason than we are simply running out of time this year. Pressure is also mounting on the White House. The closer we get to the 2012 election (now just 17 months away), the more likely new initiatives will be put forth for an uncertain result. At this point, I do not see much relief to these dismal numbers. Interest rates will offer some insight on how investors perceive the strength of the economy so watch the 10-year Treasury yield closely.

LOOKING AHEAD

This coming week marks the beginning of 2nd Quarter corporate earnings announcements. Good earnings numbers will help stem the worry surrounding the unemployment data and may boost the markets. If the numbers fail to meet expectations, I fear that the recent gains in the markets will be hard to hang on to.

My technical analysis is essentially unchanged. Stocks are still favored over bonds, small and mid-capitalization stocks favored over large. Growth over value, and equal-weighted indexes over capitalization-weighted. The New York Stock Exchange Bullish Percent (NYSEBP) did reverse last Wednesday into a column of X's meaning that there is more demand for stocks for now. Large capitalization stocks have shown signs of life and while I continue to prefer small and mid-capitalization stocks, I believe that large growth stocks will not be a drag on portfolio returns.

I maintain my comments about sectors. While I have no significant preference within the various broad economic sectors other than avoiding Financials, I am concentrating more on Health Care, Consumer Staples, Real Estate, and Energy. Utilities have proven to be a good bond-alternative option within the equity space.

International investments maintain a greater degree of risk in my opinion given the struggles in the Euro zone with Greece and other countries (Italy for now). I am not looking to add to international positions for now and would use weaker positions in your portfolio to raise cash.

Commodities have come under stress recently but over the longer-term precious metals and energy remain favored. Oil is in a negative trend so I am less committed to oil in the near-term than I have been. Please keep in mind that commodities is a highly volatile asset class and entering positions in this category should be done so with the understanding that you are likely to experience greater volatility than with many other investments.

Bonds have been a stable investment so far in 2011. With the pullback late in June, bonds are not nearly as overbought as they had been and I believe remain attractive for now. I prefer high quality corporates, emerging market debt, and TIPs.

There are no major economic reports due out this week, however, the Initial Jobless Claims (Thursday), Retail Sales (Thursday), the Producer Price Index (Thursday), and Consumer Price Index (Friday) will all be watched closely. Earnings reports will be the focus of the week and may help the market if companies show strong earnings.

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 Dow Jones UBS Commodities Index is composed of futures contracts on physical commodities. This index aims to provide a broadly diversified representation of commodity markets as an asset class. The index represents 19 commodities which are weighted to account for economic significance and market liquidity. This index cannot be traded directly. The commodities industries can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions. Past performance is no guarantee of future results. These investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in the future.

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

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

Sincerely,

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

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

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

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

All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poors, this is a market capitalization weighted index, meaning the largest companies in the S&P 500 have a greater weighting than smaller companies. The S&P 500 Equal Weighted Index is determined by giving each of the 500 stocks in the index the same weighting in the index. The Dow Jones Industrial Average is based on the average performance of 30 large U.S. companies monitored by Dow Jones & Company. The Dow Jones Corporate Bond Index is comprised of 96 investment grade issues that are divided into the industrial, financial, and utility/telecom sectors. They are further divided by maturity with each of the sectors represented by 2, 5, 10 and 30-year maturities. The Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE) Index is a broad-based index composed of non U.S. stocks traded on the major exchanges around the globe. The Russell 2000 Index is comprised of the 2000 smallest companies within the Russell 3000 Index, which is made up of the 3000 biggest companies in the US.

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