Greece once again dominated headlines this past week as fears surfaced that the "sure thing deal" was not as much of a sure thing as investors have believed these past weeks. Additionally, the downgrade of 34 Italian banks by Standard & Poor's Friday further shook investor confidence.

All major stock indexes posted their first weekly loss in 2012. The Dow Jones Industrial Average (DJIA) fell 61 points (-0.47%) while the S&P 500 lost just over two points (-0.17%). The frequently more volatile Russell 2000 index (greater weighting of smaller company stocks) lost 2.14% and was the worst performing major index of those I follow. The technology heavy NASDAQ index was the best performing major US stock index losing just 0.06% for the week. After six trading weeks thus far in 2012, the DJIA is up 4.78%, the S&P 500 is up 6.76%, the Russell 2000 is up 9.71%, and the NASDAQ is up a strong 11.47%.

The Information Technology sector was the best performing of the eleven major economic sectors followed by Energy, Consumer Staples, and Telecom. Materials, Real Estate, and Financials were the worst with Materials and Real Estate both losing more than 2% for the week. Information Technology, Materials, Financials, and Industrials have posted double-digit gains so far this year with all sectors, except Utilities, providing positive gains.

International stocks were mixed last week with Asia/Pacific stocks and Emerging Market stocks remaining slightly positive while most other regions and sectors of the world were negative. Worries about Greece and that country's ability to deliver on demanded austerity cuts caused the greatest concerns among investors as talks between all concerned parties appear to be going down to the bitter end. For the year, the European-heavy MSCI EAFE is up 7.96% after losing just 0.29% last week while the Emerging Market sector continues to lead all other sectors both domestically and abroad.

Commodities in general were slightly negative for the week. The Dow Jones UBS Commodity Index (a broad-based commodity index) declined by 0.45% last week, but remains positive by 2.99%% for the year. Gold lost $15.00 (-0.86%) an ounce to close the week at $1725.30. Reports indicate that gold investors may have been raising cash as fears mounted about Greece, and a rising US dollar also made gold more expensive abroad hurting demand. WTI Oil and Brent both climbed last week with WTI gaining $1.01 (1.03%) per barrel while European-dominated Brent gained 2.38% per barrel. Oil prices did retreat on Friday after the International Energy Agency reduced its 2012 daily global consumption forecast by 300,000 barrels. The Organization of Oil Producing Countries (OPEC) similarly reduced its forecast as well earlier in the week. Commodity prices were also depressed by news from China that Chinese imports of commodities were down in January for the first time in seven months.

Currency fluctuations remained subdued this past week. The Euro gained $0.003 (0.23%) to close Friday at $1.319 from the previous Friday close of $1.316. The Japanese Yen gained 0.95% against the dollar. The Euro did fall a full penny on Friday's trading on the negative drumbeat of news coming from Europe about Greece.

US bonds were relatively flat again last week with the Barclays Aggregate US Bond Index gaining 0.18% for the week and is now up just 0.67% for the year. While yields of both the US 10-year and 30-year Treasuries gained last week (bond prices falling), Treasury prices jumped on Friday as investors returned to the US for safety on European worries (are you noticing a theme this week?). Mortgage-backed bonds was the best performing bond sector last week followed by US long-duration US Treasuries and High Yield, while International treasuries was the worst. For the year preferreds, municipals, treasury inflation, and emerging market debt have been the best performing bond sectors while longer duration US Treasuries has been the worst.

THIS GREEK TRAGEDY HAS NO END

Scanning media outlets both here and abroad this week, I was struck by the observation that virtually every major financial headline has a reference to Greece. I also find some irony in that fact that the word tragedy is of Greek origin. Events are moving swiftly and some of what I discuss below may have changed by the time my Update is published.

Let me begin by putting the Greek debt crisis into real numbers. According to an article in Der Spiegel this week, Greek debt in 2008 totaled €263 billion. The European Central Bank (ECB) estimates that at the end of 2011 that debt had grown to €355 billion-a jump of nearly 26%. Economic output (GDP) over the same period fell 6.9% from €233 billion to €218 billion. If the ECB's numbers are correct, the current debt-to-GDP ratio in Greece stands at 163%. The €14.4 billion bond payment due on March 20th represents 6.6% of the total 2011 output of the Greek economy. Money the Greek's simply do not have. European Union (EU) leaders understand that the growth rate of Greek debt must be halted and is at the core of demands the EU, ECB, and International Monetary Fund (IMF) have sought. These three organizations are expected to make a final decision this week on whether or not Greece will receive the next round of bailout funds estimated to be €130 billion.

This past Thursday evening the Greeks and EU/ECB/IMF negotiators announced that the Greeks had accepted the terms demanded by the EU for further aid. This agreement includes severe austerity measures aimed at reducing the amount of outstanding debt to 120% of GDP by the year 2020. A second major component of achieving this reduction in debt is the 50% "voluntary" write-down of the €200 billion of debt currently held by the private sector. These discussions appear to be going well; however, there must be complete agreement no later than next Friday, February 17th, in order for all of the bond swaps to be completed by the March 20th deadline.

If the Greeks have agreed to the new austerity measures and the private sector debt restructuring talks appear to be a done deal, then why have the markets not reacted more positively? The answer is we have been here before and the Greeks have failed to deliver on their promises of spending cuts and debt reduction. This time, the EU/ECB/IMF group is demanding that the major Greek political parties all publically support the austerity measures and that the Greek parliament passes the austerity measures into law before the bailout money will be released.

Not surprisingly many Greeks are not happy about these most recent agreements and the major labor unions have called for a two-day general strike and three days of protests before the Greek parliament votes on the austerity package either late Sunday evening (February 12th) or Monday. The leadership of both major political parties in Greece have come out in favor of the austerity cuts and are urging their party members to vote for passage. At least one minor party has come out against the package and there are reports that some individual members of both parties have said they would also oppose the deal. Most experts doubt, however, that the bill will fail to pass and that Greece will receive their money just in time.

As I have commented before, all of this deal making and bailouts does not solve the true problem in Greece and that is the Greek economy is broke and there is no economic growth in the foreseeable future that will allow the Greeks to pay off their mountain of debt. The Greek economy will require a fundamental restructuring and that may take many, many years. In the meantime, the Greeks will continue to face deadlines and rioters in the streets as they find themselves repeatedly up against the wall to make bond payments with cash it does not have. It also remains to be seen whether the Germans and other Europeans have the patience to continually provide Greece money and whether the Greeks will have the patience to face a severe cut to their standard of living and fundamental changes to their economy. I have my doubts. Greek resentment has risen dramatically as evidenced by recent signs and editorial cartoons depicting references to Hitler's Third Reich, and Greek polls showing little support for the cuts. Some Germans, but not German Chancellor Merkel, are now talking openly about releasing Greek from the EU at some point and using this next loan as a way to buy time so an orderly breakup can occur.

I believe all of this uncertainty is what eats away at the markets and frightens investors. No one really knows if Greece can fix itself or if Greece will be in the EU six-months or a year from now. The EU leadership's insistence of keeping Greece in the EU stems more from a lawyer-like desire to reach an out-of-court settlement in which you know the terms of the deal versus taking your chances in front of a judge. The markets will certainly tell us how well the Europeans are doing on dealing with this crisis.

One other point-Portugal is next.

LOOKING AHEAD

The uncertainty surrounding events in Greece is likely to continue impacting markets both here and abroad. I believe that the markets are expecting a favorable resolution in Greece and the EU even as deadlines

draw near. The lukewarm reaction to last Thursday's announcement that an agreement was reached may have indicated that the agreement had already been priced into the markets, or investors may simply be waiting for the funds to actually be transferred to Greece before anyone will begin to breathe a sigh of relief.

As investors, we must keep a close watch on Greece, however, the signs that markets have been strengthening continue. The economy shows signs that growth, albeit weak, is here to stay. The political uncertainty surrounding the upcoming elections is still months away and the Federal Reserve remains exceedingly accommodative.

The markets are overbought but not to the point that new positions cannot be taken, however, that window may be closing. Overall, the market is currently 114% overbought in relation to the past ten weeks and I consider a reading of 150% as a clear red flag. US Stocks have continued to be the strongest of the five major asset categories I follow followed by Foreign Currencies, Commodities, Bonds, and International stocks. International stocks have made the greatest improvement recently particularly the emerging market sector.

Among US stocks, mid-capitalization growth stocks remain favored from a relative strength standpoint along with equal-weighted indexes. All major economic sectors are favored with Information Technology and Real Estate posting the strongest technical scores while Consumer Discretionary and Real Estate are the strongest on a relative strength basis.

As noted, the emerging market sector continues to perform well with emphasis on the Asia/Pacific region. Thailand, Indonesia, and Malaysia are particularly strong countries from that region of the world. South African and Peru are also performing very well at this time. The volatility within the emerging market space makes investing in these regions riskier than most and should only be considered by more risk-tolerant investors.

Other than gold and precious metals, the commodity space is showing lackluster returns so far in 2012. Global demand appears to be weakening and a strengthening US dollar is providing headwinds for commodities. Individual commodities may pop based upon an important headline or event; however, across the board I see broad commodity investments as a place to trim portfolios right now. My long-term bias remains towards carbon fuels once demand picks back up or the US dollar weakens.

The bond market remains attractive and I am not changing any of my positions for this asset category. I continue to like international bonds, inflation-protection bonds, and a mix of high-yield and high-quality bonds. I am also watching senior bank loan bonds and am considering these as part of my bond portfolio recommendation. I do believe that for most bond investors income is the number one issue and this continues to be harder and harder to achieve as interest rates remain low. Bond investing has become much more difficult in recent years and I suggest investors pay particular attention to this part of their portfolios.

There are a slew of important economic reports being released this week. On Tuesday morning the Retail Sales report for January is expected to show a nice bounce on the strength of auto sales. The January Industrial Production report will be released on Wednesday morning. It is expected that industrial production will increase over December's report. Thursday will have a group of reports coming out. January Housing starts are expected to increase slightly over December's numbers while Initial Jobless Claims is anticipated to be about the same as last week, and the Producer Price Index will give investors some indication of how much inflation is showing up at the manufacturing level. Consensus expects a jump. The week finishes on Friday with the Consumer Price Index (CPI). Like the Producer Price Index (PPI), this indicator is of inflation only at the retail level. Like the PPI, the CPI is expected to jump. Collectively these reports will help investors gauge the strength of the US economy.

The news from Europe will be important next week, but so will the reports about the strength of the US economy. Stay patient and do not let your emotions get the better of you in either up or down markets.

Please note that I will be traveling on business next weekend and will not be publishing a Weekly Update for the week of February 19th.

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

With Europe's leaders reaching an important agreement regarding greater fiscal union and Greece's debt restructuring talks dragging on, investors turned their attentions to the better than expected jobs data here at home and pushed stocks higher both here and abroad.

The Dow Jones Industrial Average (DJIA) gained 202 points (1.59%) bringing the yearly gain of this key index to 5.28%. The S&P 500 also pushed up strongly adding 2.17% for the week and is now up 6.94% for the year. The Russell 2000 (smaller capitalization stocks) leads all US indices for 2012 having gained 12.17% as investor appetite for risk continues.

Financials, Information Technology, and Telecom were the best performing sectors last week with seven of the eleven major economic sectors outperforming the DJIA. Last year's leaders continue to lag with Utilities, Consumer Staples, and Energy ranking as the bottom three performers for the week. The good news was that all sectors did turn in a positive performance for the week. For the year Materials, Financials, Information Technology, and Industrials are leading with double-digit returns. Utilities, Consumer Staples, and Telecom are the bottom three performers with Utilities the only sector with a negative return so far in 2012.

The rally in International stocks continued as worries over an immediate meltdown in Europe subside. The MSCI (EAFE) gained 2.27% for the week and is us 8.28% for the year. The European Union (EU) summit held the first part of the week resulted in 25 of 27 EU countries (Britain and the Czech Republic the two exceptions) signing a Germany-led proposal to increase fiscal union. Although Greece has yet to reach agreements regarding restructuring their debt with private bondholders and getting a commitment for additional funding from the EU, talks are progressing. Emerging Market stocks continue to lead all major stock categories with an increase last week of 3.16%. This international sector is up 15.76% for the year.

Commodities were generally flat for the week. The Dow Jones UBS Commodity Index (a broad-based commodity index) declined by nearly three-quarters of a percent last week but is up 3.46% for the year. Gold gained $4.90 (0.28%) an ounce to close the week at $1740.30. For the year, gold has gained 11.07%. Base metals (copper, tin, lead, etc.) have also gained nicely for the year and are up over 13% as a group. WTI Oil lost $1.72 (-1.73%) a barrel for the week but did rally 1.5% Friday on the strong jobs report. The performance of base metals and oil is tied closely to investor sentiments about future economic growth and currency movement while gold is considered by soma as a safe-haven play.

Currencies were relatively unchanged for the week. The Euro lost 0.45% to close Friday at $1.316 from the previous Friday's close of $1.322. The Japanese Yen also lost a modest 0.20% against the dollar. The Indian Rupee, the Mexican Peso, and the Brazilian Real are the best performing currencies in 2012 so far after posting nice gains last week.

US bonds were flat last week with the Barclays Aggregate US Bond Index losing 0.06% for the week and is now up just 0.48% for the year. International bonds again led all bond sectors last week while US Treasuries lagged all sectors. The US 30-year Treasury yield closed Friday at 3.12% up slightly from the week before and for the year has increased from 2011's close of 2.89%. US Treasuries continue to be a so far safe-haven investment and as investors' appetite for risk increases, I believe US Treasuries are likely to sell off and interest rates rise.

US JOBS GROWTH AND EUROPEAN PROGRESS

The US unemployment rate unexpectedly fell to 8.3% as net jobs increased by 243,000 in January according to the Department of Commerce. The increase was solid and across the board pushing stock markets nicely higher on Friday and pushing up interest rates as investors sold bonds to buy stocks. The only negative headline from the report continues to be the drop in the participation rate, which measures the total size of the US workforce. This number fell by 1.2 million people to its lowest rate since 1983. All in all this was an excellent report.

The news from Europe was also encouraging. EU leaders agreed to greater fiscal unity meaning that if a country violates certain parameters set regarding debt ratios, the violating country will immediately be referred to the European Court of Justice and may face sanctions. This progress was overshadowed, however, by a German miss-step when the German Finance Minister suggested that Greece should turn over part of its fiscal sovereignty to an EU watchdog to make sure the country adheres to strong austerity cuts. The Greeks screamed in protest and most of the other EU leaders voiced their support of Greece. So it does appear that there is clearly a limit to how much sovereignty EU countries are willing to cede to the EU and this in turn will, in my opinion, continue to cause on-going conflict among profligate members and the rest of the EU. The agreement reached in Brussels last week must now be voted on by each of the member nation parliaments and early signs are that there may well be opposition organized by the extremely influential public service unions found within most EU countries.

Greece continues to negotiate two separate deals. First, the country is negotiating with the private bondholders for a restructuring of the debt these investors hold. Most reports indicate that a successful outcome is near. Second, Greece is negotiating with the EU, the International Monetary Fund (IMF), and the European Central Bank (ECB) for another installment of lending from the European bailout fund. These negotiations are not going as well and face a hard deadline prior to the March 20th repayment of €14.4 billion ($18.9 billion) in bonds coming due. The Greeks do not have the funds to make the payment, and if agreement is not reached, Greece will be the first EU country to default on its debt. The Europeans, especially the Germans, are very concerned that without greater commitments of austerity from the Greeks, they will never repay their loans and they do not want to throw good money after bad. The Portuguese and their bondholders are watching Greece carefully because the terms of success or failure will likely be applied to that country next.

Good news in general last week, but important decisions this week may signal the longer-term success or failure in the European region.

LOOKING AHEAD

The markets have moved into an over-bought status resulting from the gains so far in 2012. This means that new positions must be evaluated carefully before purchases made. I believe the most over-bought sectors in the market today are high-yield bonds, emerging market bonds, municipal bonds, and real estate. Individual investments must also be carefully evaluated before buying because the risk-reward relationship may not favor the investment currently, and buying on a pullback may be a better option.

US Stocks have continued to be the strongest of the five major asset categories I follow followed by Foreign Currencies, Commodities, Bonds, and International stocks. Mid-capitalization growth stocks remain favored from a relative strength standpoint among US stocks, while major US economic sector has moved into a favored status.

The strengthening trend in the Emerging Market sector suggests that investment here may be warranted for more aggressive investors. Keep in mind that the International Stock asset category is still in last place, but has been showing significant improvement.

Gold and precious metals have regained their top position among commodities. The negative trend in Commodities in general has prompted me to consider reductions in commodity positions, except for precious metals, but I am not generally in favor of eliminating all commodities from your portfolio if you already own positions. Positions in base metals may also be considered at this time.

The bond market remains attractive and I am not currently considering changing any of my investments for this asset category. I continue to like international bonds, inflation-protection bonds, and a mix of high-yield and high-quality bonds. I am also watching senior bank loan bonds and am considering these as part of my bond portfolio. The Federal Reserve's announcement that they intend to purchase more long maturity bonds may help to shore up the long end of the yield curve, so be alert. I typically favor the short and intermediate maturity bonds because they potentially have less volatility to interest rate moves.

The coming week has only two significant economic reports due out--the regular Thursday Initial Jobless Claims and Friday's report on the International Trade Balance. Consensus calls for first time jobless claims to increase by 3000 to 370,000 for the week. This number remains important as current evidence regarding the state of unemployment within the country.

I was pleased by last week's markets and the overall trend in markets so far in 2012. I want to remind readers that the markets move up and down and I believe that there will be attractive buying opportunities when markets make their likely pullbacks. Patience is imperative for good investing.

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

Markets completed the last full week of trading in January mixed. The first estimate of the 4th Quarter 2011 US Gross Domestic Product (GDP) came in at a below consensus 2.8% disappointing investors. For the entire year, US GDP

rose an anemic 1.7%. The European debt crisis was the main topic among international economic leaders in Davos, Switzerland, but little agreement on how to proceed. Attention will now turn to this week's European Union (EU) summit in Brussels. Lastly, the Federal Reserve Chairman, Ben Bernanke, announced that US interest rates would remain between 0.0% and 0.25% until at least 2014 on year longer than previously planned.

For the week, the Dow Jones Industrial Average (DJIA) posted its first loss of the year losing 60 points (-0.47%) bringing the yearly gain of this key index to 3.63%. The S&P 500 managed to eke out a small gain of just under one point (0.07%) and is now up 4.67% for the year. The more volatile Russell 2000 continued its winning ways adding another 1.81% and is now up 7.82% for 2012. The technology heavy NASNAQ leads all major US indexes with a gain of 8.08% for the year following another 1.04% increase last week.

Real Estate, Materials, and Industrials were the best performing sectors last week easily outpacing the DJIA. Telecom, Consumer Staples, and Utilities were the bottom three with Utilities still managing a positive return for the week. Through most of January, the best sectors have been Materials, Industrials, and Financials with Utilities, Telecom, and Consumer Staples the bottom three performers. As I said last week, last year's dogs are this year's heroes as investors have switched back to a decidedly "risk-on" mode for now.

International stocks continued to rally as it appears that the European Central Bank's (ECB) decision to offer low-cost liquidity to European banks through the Long-Term Refinancing Option (LTRO) is working to buy policy makers more time to find a solution to the more vexing and critical growth issue. Italy's debt financing costs have fallen significantly from the start of the year when their 10-year sovereign bond interest rate was 7.1%. As of market close on Friday, that rate has fallen to 5.9%. Of the big four continental European countries (Germany, France, Spain, and Italy), only Germany has seen its 10-year interest rate rise and that increase is just a few basis points (100ths of a percentage point). Emerging Market stocks continue to lead all major stock categories with an increase last week of 2.82% and as a category is up 12.21% for the year. The Asia/Pacific region leads the rest of the world while Developed Markets, although nicely positive, lag.

Commodities switched into high gear last week with the Dow Jones UBS Commodity Index (a broad-based commodity index) posting a 3.81% increase. News that the US Federal Reserve was expecting to keep interest rates at their very low levels for another year out to 2014 was the catalyst for much of the growth. Low interest rates here keep the US Dollar weaker than it might be otherwise, and this makes commodities cheaper to buy in the rest of the world pushing up demand and prices. Countering this currency-induced demand for many raw materials is the weakening global economy. Gold has strongly rebounded gaining $71.40 (4.29%) and ounce to close Friday at $1735.40. For the year, gold is up 10.76%. Investors are going back to gold as a safe-haven as yields on US Treasuries will likely remain almost non-existent for the foreseeable future. WTI Oil gained $1.10 (1.12%) to finish last week at $99.56. For the year, WTI Oil is up just 0.74%. Brent crude that comes predominantly from the North Atlantic and sets the price for two-thirds of the world's oil supplies is up 3.80% for the year. Investors are watching the tensions between Iran and the West very closely and any loss of supply from Iran or fighting will undoubtedly push oil prices higher.

The Euro gained for the second week in a row adding 2.8 cents to close at $1.322. Euro investors continue to be encouraged by the general drop in interest rates for Spain and Italy and in anticipation of progress at this week's EU summit. Recent strength is clearly on the side of the Euro as it led all major international currencies last week while the Japanese Yen was the weakest. The Brazilian Real and the Indian Rupee remain the best performing currencies in 2012 after posting moderate gains last week.

US bonds posted their best week of the year with the Barclays Aggregate US Bond Index gaining 0.57%. International bonds and US municipal bonds were the best performing categories while short duration/maturity categories trailed. When interest rates are factored in, most every bond category was positive for the week. For the year, preferreds, International Treasury Inflation notes, US municipals, and high yield are the best performing categories. Long duration/maturity US Treasuries is the worst. Chairman Bernanke's decision to suppress interest rates here in the US and step up purchases of longer maturity bonds will likely help stem some of the losses the longer-term US Treasuries have suffered so far this year.

ATTENTIONS DIVIDED

In case you missed it, the World Economic Forum convened this past week in Davos, Switzerland. This annual gathering of the world's financial elites

from both public and private sectors, developed and emerging markets, and academics of all types, is intended to provide a forum to discuss the important economic issues of the day and try to find a common path towards prosperity for all. Discussions this year focused on finding a solution for Europe's woes. Meanwhile, back here at home, the 4th Quarter, 2011 GDP statistics were released with a bit of a thud. And if that was not enough, talks continue in Athens to try and reduce the amount of privately held Greek debt. Investors' heads were on a swivel as they monitored the news from Davos, New York and Washington, and Athens.

I will begin by looking at some of the economic data from here at home. As I stated, the first estimate (there will be another estimate before the final GDP number is released March 29th) of the 4th Quarter 2011 GDP number came in at 2.8% bringing the 2011 GDP growth rate at 1.7%. Although the consensus quarterly number of 3.1% growth was not met, the underlying numbers were pretty much as expected-and that is the problem. First, much of the increase in manufacturing and production came in the form of inventory replenishment. This was anticipated, however, final demand (goods that are actually purchased at retail) was flat. Most economists believe this sets the stage for slower economic growth as manufacturers must now wait for their inventory to be sold to you and me before they replenish again. Government spending fell sharply as defense expenditures were slashed holding down GDP growth as well. Consumer spending increased at a very modest rate to 2% from 1.7% in the previous quarter. Any growth is better than no growth so there is something to cheer about; however, some segments of the economy look pretty bad right now.

The Commerce Department released their final 2011 report on US New Home Sales and that number is bleak. For the year, 302,000 new homes were sold in this country. This is the lowest number since the government started collecting this information in 1963. Even more concerning is the per capita data. Only 2.5 new homes were sold for every 1000 households in the US. This again is a record low. For most of the past 48 years this number has ranged between 6 and 9 households per 1000 and indicates just how week the new home market is. We have a long, long way to go before the housing sector contributes again to the GDP.

Unemployment is the other critical number. First time jobless claims have been trending downwards the past few weeks until last Thursday's report showed an increase of 21,000 raising the number to 377,000 for the week. This lack of job creation will dampen the little bit of consumer confidence that has been increasing as the jobs numbers improved. The January employment report scheduled for release this Friday will be an important indicator of the durability of the slow but steady jobs trend. Consensus calls for an overall drop in the number of new jobs created to 135,000 from December's 200,000. The overall unemployment rate is expected to remain at 8.5%.

Back to beautiful Davos. As the elites drank expensive wines and dined on 5-star fare, little of consequence emerged. I think German Chancellor, Angela Merkel, gave the most important speech. In short, she said Germany would not be an open checkbook for the rest of Europe and that countries like Greece and Portugal must get their fiscal houses in order. She also said that it was imperative that the Europeans agree to a more closely unified economic system with Brussels taking on what many perceive as sovereign economic authority from the individual countries. British Prime Minister Cameron was quick to publically push back from anything like an endorsement of that concept. So lots was said but no real solutions emerged on how to fix Europe.

Finally, there is story of the ongoing negotiations between the private bondholders of Greek debt and the Greek government. As I discussed last week, the successful outcome of these talks is crucial to the refinancing of Greek debt and any hope of economic stability in the Euro zone. All reports indicate progress continues to be made and there is some hope that a final agreement will be reached this week.

LOOKING AHEAD

The EU summit starts Monday in Brussels. Interest will be high to see what, if anything emerges from this summit. Additionally news from Athens, good or bad, could possibly the biggest driver of the markets depending on the outcome of the talks there. Here in the US, as I noted earlier, the unemployment figures will be closely watched for signs of improvement in the economy.

US Stocks continue to be the strongest of the five major asset categories I follow followed by Foreign Currencies, Commodities, Bonds, and International stocks. Mid-capitalization growth stocks remain favored from a relative strength standpoint among US stocks, while every major US economic sector has moved into a favored status.

The strengthening trend in the Emerging Market sector suggests that investment here may be warranted for more aggressive investors. Keep in mind that the International Stock asset category is still in last place, but for now, some exposure may be taken. My reservations regarding European stocks remains and I would avoid that area except in very limited circumstances.

Gold and precious metals have regained their top position among commodities. The negative trend in Commodities in general has prompted me to consider reductions in commodity positions, except for precious metals, but I am generally not in favor of eliminating all commodities from your portfolio if you already own positions.

The bond market remains attractive and I am not changing any of my recommendations for this asset category. I continue to like international bonds, inflation-protection bonds, and a mix of high-yield and high-quality bonds. I am also watching senior bank loan bonds and am considering these as part of my bond portfolios. The Federal Reserve's announcement that they intend to purchase more long maturity bonds may help to shore up the long end of the yield curve, so be alert. I generally favor the short and intermediate maturity bonds because they potentially have less volatility to interest rate moves.

In addition to the jobs reports coming Thursday and Friday, the ISM Manufacturing Index for January 2012 will be released Wednesday morning. Consensus calls for this index to increase again to make it four months in a row with an increase. As I noted in the previous segment, there is a lot of concern about the sustainability of GDP growth in the early part of 2012 so investors are watching reports like the ISM Manufacturing Index for an indication of how the economy is doing.

I am encouraged by the markets' progress in January but I remain cautious. The risks in the markets have not been subdued, but they have been mitigated for now. I maintain my conviction that riskier assets within the same broad asset category must be balanced with lower risk assets. It is just too early to tell how things will ultimately work out, so I am hedging my 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.

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

Markets continued their positive start for 2012 as investors were encouraged by successful bond auctions in Europe, continued positive economic data here in the US, and raising expectations that China will continue to be an economic engine for growth around the world. The markets are clearly in a "risk on" mode to start the year.

For the week, the Dow Jones Industrial Average (DJIA) gained 298 points (2.4%) and is now up a respectable 4.1% for the year. The S&P 500 increased 2.0% for the week and is up 4.6% for the year. The Russell 2000, a general measure of smaller and thus riskier companies, was up 2.7% and is now up 5.9%. The NASDAQ index, representing the largest technology companies here, leads all major US indexes with a 7.0% increase in 2012. Google's pullback on Friday in the wake of a negative 4th quarter earnings report has been one of the few dark clouds in the technology sector recently.

Technology, Energy, and Real Estate were the top performing sectors last week while Utilities, Telecom, and Consumer Staples were the weakest. Utilities remains the only sector with a negative return in 2012. Investors have been shifting away from defensive sectors favoring those that are consistent with the "risk on" theme.

Early European sovereign debt auctions in Italy and Spain continue to go well as the European Central Bank (ECB) floods European banks with cheap cash (think QE II by the US Federal Reserve) pushing international stocks strongly positive. The MSCI EAFE index gained just over 4% last week and is now up 4.2% for the year. The emerging market sector leads all others with a gain of 9.1% in 2012 followed by the Asia-Pacific region at 6.0%.

Commodities remain in neutral for the year. Last week the broad basket Dow Jones Commodity Index was up 0.5% and is now up 0.4% for 2012. The exception has been gold which remained strong adding another $33 per ounce (2.0%) to close Friday at $1664.00. Gold is now up 6.2% for the year. WTI oil continued to fall as the price per barrel dropped marginally last week (-0.2%) and is now down 0.4% for the year. Oil prices reflect investor sentiment about the prospects of unrest in the Middle East, currency fluctuations, and demand expectations.

The Euro posted its first gain in seven weeks adding two-and-a-half cents to close at $1.293. Euro investors were encouraged by the general drop in interest rates for Spain and Italy following their successful bond auctions. The Indian Rupee and Brazilian Real remain the best performing currencies in 2012. As with stocks, it appears that riskier currencies are in demand for now.

Most bonds had a flat to negative week with the exception of the international, preferreds, and high yield sectors. The Barclays Aggregate US Bond Index fell 0.5% for the week and is now down 0.1% for the year. The 10-year and 30-year US Treasuries both lost value pushing the 10-year rate above 2% and the 30-year rate above 3% and making long-term US Treasuries the worst performing bond sector for the week and the year.

THE CERTAINTY OF UNCERTAINTY

As an avid reader of history all of my life, one of the important lessons (of many) I have learned is that our ancestors lived their lives in periods of great fear and uncertainty. Try for a moment to put yourself in George Washington's shoes at Valley Forge that terrible winter of 1777-1778, or Abraham Lincoln as he sat in his office learning of the terrible carnage that had just taken place at Antietam in the fall of 1862, or of the average American living during the great depression, or what it must have been like listening to the radio and learning of the bombing at Pearl Harbor. Those were uncertain times. Outcomes were in doubt. Yet looking back today, we do not feel that uncertainty because we know that each of those challenging periods of our history were met successfully by the men and women of our collective past. Today is no different from yesterday. Yesterday is no different from last year, and last year no different from last century. The nature of today's challenges are different, but the uncertainty is the same.

I believe the greatest challenge facing the United States, Europe, and the rest of the developed world today is the ever-increasing mountain of debt we are incurring. The numbers are staggering. The United States owes $15 trillion, Japan owes $13 trillion, and Europe owes some $12 trillion. These numbers reflect just what is currently on the books, not future obligations that by some estimates can be four or five times larger than the current balances.

As bad as the current debt levels are, more troublesome is the inability of governments to slow down the yearly growth of debt. The United States will add another $1 trillion plus in new debt in 2012 and the rest of the developed world will follow suit. The rate of increase in new debt is greater than the growth rate of economic output. If the US adds only $1 trillion of new debt this year on a base of $15 trillion, it will represent an annual increase of 6.67% in new debt. Most economists believe the increase in the gross domestic product (GDP) this year may reach 2% or 2.5%. Debt is growing faster than growth and no nation can sustain their economy for long with this imbalance.

The uncertainty we face today is trying to figure out how to deal with the explosion of debt globally. This debt problem is at the heart of the European crisis, it is responsible for the gridlock in Washington, and it is damaging to emerging market economies as they struggle with hot money induced inflation (foreign investors throwing money at a country). The challenges are daunting. For starters, every solution will involve some sort of pain and sacrifice. We have a history in this country of enduring terrible pain and suffering and emerging stronger and more resilient than before. During the Civil War, the Union and Confederacy lost an estimated 625,000 killed. This terrible number represented about 2% of our nation's population in 1860. In today's numbers, this would correspond to over 6.2 million American soldiers killed. Thankfully, this is not the nature of sacrifice we must make, but the threat to our economic way of life is just as real, and all will feel the economic pain. Other challenges include the length this period of sacrifice is likely to entail. It could take a decade or more to get this right. Then there are the politicians who, up until now, have lacked the moral courage to make hard decisions, and a populace who may tire of sacrifice because they do not understand the gravity of the threat. Failure to act now will only make matters worse in the years to come.

We must approach this problem just as our forefathers did-with grit and determination. Step one is to reduce and stop the rate of increase in new debt. This is precisely what many European countries are attempting to do with their austerity measures. Unfortunately, austerity measures in countries dominated by government spending results in economic slowdown, which in turn exacerbates their deficit problems as tax revenues prove inadequate to finance current fiscal commitments. Political leaders must adopt measures to foster economic growth so the current debt can actually be reduced. This means finding a delicate balance between cutting spending, raising enough revenue to pay for current obligations, not shocking the economy into another recession, and convincing the public that today's sacrifices will help all of us in the long-term. None of this will be easy, but big challenges never have been before and I do not see why this time should be any different.

As investors navigate this challenging time, it will be difficult to determine if we are on the true road to recovery or heading down a path of false hope and loss. Headlines may say one thing and the markets another. This is why I believe so strongly in listening to what the markets are telling us. Collectively the millions of decisions made each day by you, me, and others around the globe represent our cumulative votes in the verdict of right or wrong. These votes reveal themselves in relative strength analysis, and I believe there is opportunity for investors who can "listen" to the markets. So let's work together, listen to the markets, and make smart investment decisions based upon the information available. Finally, we must remain diligent. Changes in relative strength will happen and as circumstances warrant, we must be ready to change as well.

LOOKING AHEAD

The ECB's Long-Term Refinancing Option (LTRO) has fixed the EU's liquidity problem for now buying yet more time for Europe's political leaders to address the debt crisis. Think of it this way, liquidity is like oxygen to the body-without it, you cannot survive for long. Other issues such as fiscal policy reform and treaty reorganization are like food-a person can last quite a long time without eating or in Europe's case, implementing real reform. Reform must be accomplished or the EU will slowly starve to death. Now that the EU is breathing again, investors are turning their attention to the actual efforts to achieve long-term solutions. The EU summit on January 30th will be scrutinized to see if policy address the big issues facing the EU-holding the EU together, protecting the Euro, true financial unification, and permanent debt restructuring.

There is one other immediate problem that must be addressed, however, and that is the restructuring of Greek debt. There are negotiations currently taking place between the government of Greece and private bondholders. Getting the private bondholders to take a "voluntary" write down on their Greek bonds is an essential step for Greece to receive the next tranche of aid from the EU/International Monetary Fund. The Greeks must rollover €14.4 billion ($18.6 billion) of existing debt on March 30th and they cannot meet that obligation without the bailout. Should the talks fail and an agreement not reached, some investors feel this will dangerously destabilize the fragile EU situation.

I continue to remain cautious about the markets due to the uncertainty and risk in the world. It is in everyone's self-interest to reach agreement about Greece and solving the EU's long-term problems. The road to a satisfactory ending is going to be a rocky one and the potential for volatility remains. If your risk tolerance permits taking a position in international equities, I believe you can do so. The recent strength in emerging markets is encouraging, but any investment here must be undertaken with a clear understanding of the risks involved.

US equities continue to be the strongest asset category of the five I follow and I favor investment in high quality, dividend-paying investments. I also favor some investment in riskier assets such as small and mid-capitalization stocks; however, I suggest under-weighting these investments within your equity allocation. From a technical perspective, US stocks have shown very solid performance so far in January and this bodes well for 2012. Quietly Financials, small capitalization stocks, Industrials, and Biotech stocks have shown the most technical improvement over the past few months and momentum is carrying these sectors higher. Commodities and longer-term bonds have shown the greatest weakness.

The bond market remains attractive and my recommendations for this asset category include international bonds, inflation-protection bonds, and a mix of high-yield and high-quality bonds. I am also watching senior bank loan bonds and am considering these as part of my bond portfolio recommendation. The recent drop in US Treasury prices (increasing interest rates) has caused this sector to weaken materially. Should the crisis worsen in Europe I would anticipate this trend to reverse. If your portfolio includes longer-term bonds be very sensitive to what is happening in Europe and interest rates here. I favor the short and intermediate maturity bonds because they potentially have less volatility to interest rate moves.

The first report of the 4th quarter GDP will be announced on Friday and will be watched very closely. Consensus is for GDP to have grown to 3.1% compared to 1.8% for the previous quarter. This will be a very important announcement and could likely be a market mover. Besides the GDP report, Jobless Claims and New Home Sales will be released on Thursday. New home sales is an important indicator of recovery for this vital economic sector.

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

As expected, Standard & Poor's (S&P) Rating Services cut the sovereign debt ratings of nine European countries including France, whose AAA rating was cut one notch to AA+, Friday evening after US markets closed. Word that an S&P announcement would be made on Friday did not surprise markets and the French finance minister went on live television in France before the announcement in

the US to assure the French people that the downgrade was not "catastrophic" and that, "it is not the ratings agencies that dictate the policies of France." Besides France, Austria's AAA rating was cut one notch, while Italy, Spain, and Portugal were each cut by two notches. Portugal's debt rating is now BB meaning its debt is now junk status and considered speculative.

Global traders were aware of the pending downgrades during most of the European and US trading sessions Friday pushing markets lower, but not significantly so.

The Dow Jones Industrial Average (DJIA) fell 49 points (-0.39%) Friday but closed the week up 62 points (+0.50%). The S&P 500 added 11 points (0.88%) for the week, and the Russell 2000 posted a strong 1.93% gain indicating that investor tolerance for riskier assets is increasing for now. Two weeks into the year the DJIA is up 1.67%, the S&P 500 is up 2.50%, and the Russell 2000 is up 3.14%.

Materials, Financials, and Industrials were the top three performing sectors this past week while Energy, Utilities, and Consumer Staples were the weakest. For the year only Utilities and Consumer Staples have a negative return.

The on-going troubles in Europe have hurt that region. The Euro-centric MSCI EAFE index posted a 0.60% gain last week and is up just 0.19% for the year. Looking around the world, emerging markets have led all international sectors posting a 2.94% gain last week with most of that strength coming from the Asia-Pacific region. For the year, emerging markets are up a collective 4.5% while developed markets are up 1.76%. Two weeks does not make a trend, but it will be important to see if this relationship of out-performance is maintained or expanded.

For the week the broad basket Dow Jones Commodity Index was down 1.43% and pulled the index into negative territory (-0.12%) for 2012. Gold added $14 (0.87%) an ounce closing Friday at $1630.80 and is now up $64.00 (4.08%) an ounce for the year. WTI oil fell $2.86 (-2.82%) to close the week at $98.70. Oil prices were hurt by the continuing weakness of the Euro and expectations of weakening demand from a slumping European economy.

The Euro continued to struggle this past week following a trend that has been in place since early September 2011. For the week the Euro lost 2 ½ cents to the US dollar to close at $1.268 its lowest level since September 2010. The threat (and realization) of a sovereign debt downgrade and an overall slump in economic growth has pushed investors away from the Euro and into the US dollar and Japanese Yen. For the week the Brazilian Real and Indian Rupee showed the greatest strength, but it should be noted that both of these currencies are coming off significant lows. Two weeks does not make a trend, and I will monitor this development as well.

Bonds have carried on their strength from 2011 into 2012. The Barclays Aggregate US bond index posted a 0.57% gain for the week and is now up 0.42% for the year. The US 10-year yield dropped to 1.868% from the previous week's close of 1.957%. The US 30-year yield fell to 2.913%. Low US Treasury rates are attributable to the Federal Reserve's stated policy of keeping all rates at very low levels and the Federal Reserve's Open Market Committee's action of purchasing longer dated bonds in the open market-a ready buyer keeps rates down. For the week, long Treasuries benefited and was the best performing sector within the bond category. Municipal bonds also did well. Emerging market debt was the weakest performing sector, however, its performance was only slightly negative.

THE EUROPEAN DOWNGRADE VS. THE REAL PROBLEM

The well-telegraphed downgrade finally hit Europe Friday evening. The Euro fell a bit. Stock markets fell a bit, and US Treasury yields fell a bit. But in the end, not much really happened. Nothing happened because the downgrade is not really the story. First, Standard & Poor's responsibly gave the markets plenty of warning that they were going to downgrade many European countries. Second, whether France is AAA or AA+ really doesn't matter. Just look at how the US Treasury prices and yields reacted to our downgrade. Third, the real issue is not about downgrades but rather how the European Union continues to deal with their multi-year debt crisis. The downgrade was an important reminder to European politicians that they must move decisively to resolve the crisis, but ultimately what matters is still being debated in Brussels and Greece.

The most important story from Europe this past month has been the move by the European Central Bank (ECB) to significantly increase liquidity within the financial system much like the US Federal Reserve did during the height of the 2008 financial crisis. The ECB introduced the Long Term Refinancing Operation (LTRO) in which banks can borrow funds for three years at very low interest rates. Banks need only to put up average quality bonds in order to access this nearly unlimited supply of money. The ECB's expectation is that bankers will borrow heavily at 1% and reinvest into sovereign debt from countries like Italy and Spain in order to make significant profits on the higher yielding sovereign debt. Based upon the results of early bond auctions in those countries, the strategy is working as good demand has pushed yields down sharply from earlier highs. This takes considerable pressure off the political class and continues to buy them time to do whatever they are doing. The dark lining to this silver cloud is the ECB is loading up on riskier assets that could blow up their balance sheet if demand does not keep up with the large amount of debt that must be rolled over. Additionally, this policy only addresses the liquidity part of Europe's problems and much work remains to deal with countries that are hopelessly in debt.

In the meantime, Greece is teetering on bankruptcy as negotiations between private bondholders and banks stall. A key qualification for the payment of the next bailout from the Europeans and International Monetary Fund is the willingness of private lenders to agree to a 50% reduction in the value of their investments. This voluntary "haircut" is critical to avoid an uncontrolled meltdown of Greece and the possibility of a panic extending into the other weak, but sizeable, countries like Spain and Italy. Talks are expected to re-start this week, but there is a lot of uncertainty about a successful outcome.

So we find ourselves in limbo watching and waiting for the next European summit (January 30, 2012) and some breakthrough from the political class-a wait that has occurred numerous times before in the past year or so. I sincerely hope the Europeans find a way out of their crisis because the ramifications of failure extend globally. A successful outcome remains very much in doubt.

LOOKING AHEAD

The markets will certainly be watching the developments in Europe this week, but some focus will return to the US. Fourth quarter 2011 earnings announcements have begun and will continue for the next several weeks. JP Morgan's quarterly earnings announced last week were indifferent at best and are raising concerns about the overall prospects of the US banking industry. Investors will be looking for confirmation of growth that some of the early governmental statistics have signaled across the major economic sectors. Putting a twist to President Regan's famous view of the former Soviet Union I suggest investors will trust the government's data but will verify with corporate profit announcements.

I remain cautious about the markets due to the uncertainty and risk in the world. The Europeans may well find a way to continue kicking the can down the road, however, I do not have much confidence in the Euro Zone's economic prospects for the next few months. The recent jump in emerging markets is worth noting, but I am not prepared to recommend buying emerging markets at this time.

US equities continue to be the strongest markets and I do favor investment in high quality, dividend-paying investments. I also favor some investment in riskier assets such as small and mid-capitalization stocks, however, I suggest under-weighting these investments within your equity allocation. Balance and quality should characterize equity investments today.

I believe that the current global slowdown, which is underway, coupled with the strengthening US dollar, makes commodities less attractive at this time; and I am recommending a reduction in broad commodity investments.

The bond market remains attractive and my recommendations for this asset category include international bonds, inflation-protection bonds, and a mix of high-yield and high-quality bonds. I am also watching senior bank loan bonds and am considering these as part of my bond portfolio recommendation.

There are a large number of government economic reports coming this week. The Producer Price Index and Industrial Production data will be released on Wednesday. Thursday brings Jobless Claims, Consumer Price Index, Housing Starts, and the Philadelphia Fed Survey. The week closes on Friday with Existing Home Sales. Investors will be looking for signs of economic strength in terms of better production numbers, homes sales, or a continued falling of unemployment. Nervous markets, like the one we have today, seek validation in every headline and economic report. We are just continuing the theme of late 2011 into 2012.

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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