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

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

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

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

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

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

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

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

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

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

THE NEW YORK STOCK EXCHANGE BULLISH PERCENT (NYSEBP)

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

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

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

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

Looking Ahead

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

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

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

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

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FOLLOW-UP ON THE JANUARY EFFECT

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

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

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

Looking Ahead

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

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

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

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

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

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

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

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

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

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

UNCERTAINTY EMERGING FROM EGYPT

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

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

US ECONOMIC NEWS

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

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

Looking Ahead

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

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

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

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

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

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

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

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

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

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

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

STOCKS IN FOCUS

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

THE NEW YORK STOCK EXCHANGE BULLISH PERCENT

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

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

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

Looking Ahead

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

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

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

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

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

Stock markets at home and abroad continued to climb higher this past week. Confidence was renewed in Europe as Portugal, Italy, and Spain all had successful bond offerings, gold pulled back as a result, and the US markets shrugged off disappointing news on the jobs and housing fronts.

The Dow Jones Industrial Average (DJIA) gained 113 points (+0.96%) to close Friday at 11,787. The S&P 500 Index gained 22 points (+1.71%) to close the week at 1293. Small capitalization stocks represented by the Russell 2000 Index gained 2.51% for the week. For the year the DJIA is up 1.8%, the S&P 500 is up 2.8%, and the Russell 2000 is up 3.0%.

The top three broad economic sectors last week were Information Technology, Financials and Energy while Telecom, Utilities, and Health Care were at the bottom. As the year gets underway I am seeing a short-term move towards the Technology and Energy sectors but not enough to make a change in the relative strength rankings.

The MSCI (EAFE) World Index gained 2.7% to lead all major indexes. The European debt crisis was seen as subsiding in the wake of the reasonably strong auctions among Portugal, Italy and Spain. Additionally, the President of the European Central Bank (ECB), Jean-Claude Trichet, stated that the ECB would take action against inflation should it be necessary encouraging markets. The Euro rebounded as well last week closing at $1.3376 compared to the previous week's close of $1.3369. This number is slightly deceiving because the Euro fell below $1.30 early in the week. The European Finance Ministers will be meeting in Brussels on Monday and Tuesday to discuss the size and rules surrounding the new European Financial Stability Facility (EFSF), and the bond markets will be watching these discussions closely. In Asia, China announced that it was increasing the debt reserve requirements of banks there yet again late Friday. Requiring another 0.5% of bank reserves to the current 19% will have the effect of pulling cash out of the Chinese economy in an effort to help stem inflation in the country. Asia and Chinese investments have typically pulled back the day following the announcement and I would anticipate the same on Monday.

Gold fell another $7.60 per ounce to close last week at $1360.90. For the year, gold has lost 4.1%. The news from Europe was largely responsible for the continued downward move as investors regain confidence of the Euro. Oil gained $3.63 (4.1%) per barrel last week as investors continue to bet on growing economic expansion both in the United States and elsewhere. The Alaska oil pipeline was reopened during the week after damage at a pumping station closed operations. The pumping station was closed over the weekend for additional repairs, but does not appear to threaten further shipments of crude. Most other commodity prices generally rose following a trend that has been in place for the past few months. Worries are mounting over the increase in clothing, fuel, and food prices as we move into the year.

The 10-year treasury ended the week at 3.3328% declining slightly from the previous week's close of 3.3256% reflecting a slightly improving trend in bonds. The broader bond market, as measured by the Barclays Aggregate Bond Index, gained 0.13%. There was little news to sway the bond markets one way or the other.

TOP STORIES

The successful sale of European bonds was certainly good news last week. I will confess, however, that I remain very cautious about Europe. The meeting this week in Brussels will certainly add further clarity to the direction Euro Zone countries, especially Germany, will move in the future as the ministers wrestle with new EFSF. Germany is a reluctant partner but must find some way to hold all of this together. If last year is any guide, this issue can turn quickly so be alert.

Most domestic news was placed on the back burner last week as the nation mourned the lost souls from the terrible shooting in Tucson. However, some key economic news was not good. First time jobless claims rose 35,000 to 445,000. Consensus expectation was for a number of 410,000. While the trend may be showing a slight improvement, the numbers are nowhere near good enough to put Americans back to work and move the unemployment rate below 9%. The news on housing was not any better. According to Bloomberg, US foreclosures may jump 20% in 2011. The report went on to say that approximately 3 million homes have been repossessed since the boom ended in 2006 and that another 5 million homes may yet be repossessed by 2013. Home prices on average have also fallen around 33% in 20 cities based upon the S&P/Case-Shiller Index. These two factors will continue to weigh on the economy in 2011.

A natural question would be, "Paul, if these two important parts of our economy have a negative outlook, how can the stock market continue to rise?" The answer is simple: supply and demand; but based upon very complex actions within the economy. Those of you who know me well understand that I harp on the fact that all economics can be boiled down to the concept of supply and demand. In this case, the stock market has more buyers than sellers. The question is where is the cash coming from? I believe a lot of it is coming from Mr. Bernanke and the Federal Reserve. The Fed is pumping billions of dollars into the economy through the quantitative easing program. Additionally, the extension of the Bush-era tax cuts and the 2% reduction of the social security tax will begin to adding US dollars into the economy. Also, as the stock market continues to rise, many smaller investors will be compelled to start selling their bonds to buy stocks (this may have contributed to the drop in bond prices in the 4th quarter of 2010). Wherever the cash is coming from, the bottom line is that it is moving to the stock markets.

I will continue this discussion next week about whether or not this trend can continue and for how long.

Looking Ahead

This is earnings season so there will be plenty of news about how some of the biggest companies fared the last three months of 2010. Additionally, investors will hang on every word from the reporting companies to get some insight on how they believe 2011 will shape up. The net result can be market can be volatility so don't be surprised by larger movements in the markets.

The general relationship of stocks, bonds, and cash has not changed. Mid and small capitalization stocks are preferred over large, growth is favored over value, and US and International stocks are preferred over Commodities, Bonds, and Currencies. Commodities, less precious metals, remain strong for now. While the best performing countries abroad last week came from developed Europe, emerging markets continue to be favored over developed. Finally, bonds have stopped falling for now so I am not suggesting selling bonds if they are an important part of your risk and income allocations.

I do believe that success in this market will require constant scrutiny by investors so open your statements, follow your investments, and call me if you have any questions.

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

US equity markets completed the first full week of 2011 higher and marks the sixth consecutive week of gains by the major US markets. The Dow Jones Industrial Average (DJIA) gained 97 points (+0.84%) closing the week at 11,674.76. The S&P 500 closed on Friday at 1271.50 adding 14 points (+1.10%). Much is made about looking at the first week of the year as a predictor for the full year and I will share some of the data on this phenomenon below.

The top three broad economic sectors last week were Information Technology, Health Care, and Financials while Consumer Staples, Real Estate, and Materials were all negative for the week. On an absolute relative strength basis, Real Estate, Consumer Discretionary, and Information Technology are the three strongest sectors while Utilities, Health Care, and Financials are the weakest.

The MSCI (EAFE) World Index lost 0.83% for the week on renewed worries over the European debt markets. Developed markets in general posted greater losses than emerging markets maintaining an overall trend that has been in place for the past year. The Far East and Middle East were, in general, the best performing areas of the world while developed Europe and India were the worst performing.

The Euro closed at $1.2916 falling $0.045 (-3.4%) from $1.3369 putting the Euro at its lowest point against the US dollar in the past four months. Europe cannot shrug off the concerns over the on-going debt problems with attention focusing this week on Portugal and Spain.

Gold fell $51.20 (-3.6%) per ounce to close last week at $1368.50 on expectations that the US and global economies were strengthening and investors were less concerned about risk and uncertainty. Oil also fell 3.5% following on the same reasoning. Both of these (and other) commodities are volatile and will trade widely on small changes in perceptions of macroeconomic issues. The gaining technical strength of commodities in general, however, is a good reason to consider including commodities in your portfolios.

The 10-year treasury closed the week at 3.3256% up slightly from the year-end close of 3.2877%. Treasuries and fixed-income in general reflect the same macro trend as commodities as investors are selling bonds in favor of more risky investments following the consensus that equities will outperform bonds in 2011. The Barclays Aggregate Bond Index gained 0.02% for the week giving indicating that the bond market in general was flat last week.

THE JANUARY EFFECT

Stock investors are always looking for "rules of thumb" or an "old wives tale" to help give them some indication of what the stock market might do going ahead. Last week I discussed the general consensus of the pundits and their predictions for 2011 and this week I will follow that up with a brief discussion of the January Effect. The January Effect has several versions, but I will focus on the one that says, "As the First Five Days of January Goes, So Goes January, and So Goes the Year."

According to The Stock Trader's Almanac, the last 38 up "First Five Days" periods were followed by full-year gains 33 times, for an 86.84% accuracy ratio; and the average gain for these 38 years is just under +14%. Of the five years that didn't "work," four related to war, and one (1994) produced a flat year. The year 2002 was the last one that failed to be properly predictive, as January started the year up +1.1%, but ended nastily with a loss of -23.4%. For those first five days of January that start off in negative territory, which have been 23 in all, they have been followed with 12 up years and 11 down years. As a sidebar, the last two years have been winners, in that the first five days showed a gain, as did the entire year.

In pre-presidential election years (of which we are in now), this indicator has a stellar record. In the last 15 pre-presidential election years, twelve full years followed the direction of the "First Five Days." Realize that the January Barometer (the direction for the whole month), has an even better track record, with 14 of the last 15 full years having followed January's direction.

So we will see what happens in 2011.

SHOULD YOU SELL YOUR BONDS?

Some of you may be wondering what is going on with US bonds. The real answer is not much. Bonds are not automatically going to go up every week, month, or year; however, they typically have less volatility (price fluctuations) than equities or commodities. Bonds are held in portfolios because investors desire a stream of income and to help dampen the effects of stock market moves. This past quarter we saw bonds, as measured by the Barclays Aggregate Bond Index, lose value (-1.4%) for the first time in eight quarters (Q3, 2008). So investors who have become accustomed to a steadily rising portfolio of bonds have seen their first setback since 2008.

In general terms, investors tend to move to bonds (or increase their allocations) when they are nervous about the stock market and want to protect their principal. This has clearly been in place for the past couple of years when inflows to bond funds has significantly outpaced stock funds. The Federal Reserve has helped this recent trend by keeping a lid on interest rates (buying bonds in the open markets) and pushing bond valuations higher (price of bonds moves inversely to interest rates). As I pointed out last week, investors are feeling more confident that stocks may outperform bonds in 2011, so bonds are being sold to raise cash to move into the stock markets pushing bonds down.

So to answer the question of selling your bonds, you must ask yourself why you own the bonds. If it was only for protection and you desire more stock-like returns, then you may want to consider moving a greater portion of your bonds into the stock market. If you are holding bonds to preserve your capital and use the interest from your bonds as income, then you probably do not want to make any changes at this time.

One final point. Not all bonds are alike. There are many different types of bonds of which risks will vary. So pay attention to the types of bonds you own.

Looking Ahead

The resurgence of debt fears in Europe is having an impact on global markets. This Wednesday the Portuguese government will offer between €750 million ($971 million) to €1.25 billion ($1.62 billion) of new bonds for sale. How the markets react to this auction will say a great deal about how serious investors perceive Portugal's problems to be. While the Portuguese are emphatic that they do not need aid, time will tell. The Euro remains under pressure for now which may negatively impact developed European stocks.

A reported leak in a pump station on the Alaska pipeline will cause supply disruptions of as much as 95% coming through the pipeline for an undetermined time. While individual oil companies may suffer, I would anticipate an increase in oil prices until repairs are made.

Mid and small capitalization stocks are preferred over large, growth is favored over value, US and International stocks are preferred over Commodities, Bonds, and Currencies. Commodities are showing growing strength and should be considered for portfolios. Bonds are holding their own, so if you own bonds for income or risk reduction, do not make adjustments to your portfolios at this time.

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

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

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

Sincerely,

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

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

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

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

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

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

Happy 2011!

US equity markets closed the year with a strong December and a good year overall. The Dow Jones Industrial Average (DJIA) ended 2010 at 11,578.72 for a gain of 1151 points (+11.03%) with 487 of those points coming in the month of December alone. The S&P 500 had similar gains closing the year up 143 points at 1257.84 (+12.80%). December's gain of 77 points accounted for half of the S&P 500's gains for the year.

The top three broad economic sectors on an absolute return basis (not accounting for dividends) were Consumer Discretionary, Industrials, and Real Estate while Utilities, Health Care and Consumer Staples showed the smallest gains. Going into 2011 the strongest three sectors on a relative strength basis are Real Estate, Consumer Discretionary, and Materials. The weakest are Utilities, Health Care, and Financials; however, Financials and Health Care are showing some recent improvement among the sectors on a relative strength basis.

The MSCI (EAFE) World Index gained 8.02% for the year and 4.90% in December. International markets have recovered as European markets gained strength as yet another round of debt worries were set aside by investors. For the year, Indonesia, Thailand, and Chile were the top performers of the countries I follow. Not surprising, Spain, Italy, and France underperformed. China posted very pedestrian turns in 2010 as concerns mounted over governmental tightening and inflation worries.

The Euro closed at $1.3369 falling $0.95 (-6.61%) against the US dollar in 2010. The Euro was under stress most of the year as problems surfaced in Greece, Ireland, Portugal, Italy and Spain over sovereign (government) debt sending investors into the US dollar for safety. Over the New Year's holiday weekend the state heads of France (Sarkozy) and Germany (Merkel) publicly pronounced their full support of the Euro and tied their respective country's future to the success of the Euro. As I noted in recent updates, the Germans and other strong European countries must preserve the Euro for their own self-interests so I am not surprised by these endorsements.

Commodities posted strong gains across the board. Gold gained 29.7% closing the year at $1421.40 per troy ounce over uncertainties surrounding paper currencies and inflation worries. Oil ended the year at $91.22 per barrel and OPEC announced earlier in December that they would not increase production and were comfortable with $100 per barrel oil prices. While still not favored over US and International stocks on a relative strength basis, commodities have made a very strong move in the last six months.

The 10-year treasury finished the year at 3.2877% down from 2009's close of 3.835% allowing US treasuries to post solid gains in 2010. The 10-year US treasury yield bottomed on October 6th at 2.393% and climbed steadily until December 15th peaking at 3.517% before staging a rally the last two weeks of the year. The broad-based Barclays Aggregate Bond Index gained 6.53% for the year as all bond categories posted solid gains despite some year-end weakness. US high yield and emerging market bonds posted the best gains for the year while municipal bonds posted the smallest.

GOING INTO 2011

One of my favorite pastimes over the holiday season is reading all of the prognostications for the upcoming year. This year was no different. The airways and internet is inundated with countless pundits making their calls for 2011 and I have said many times that I do not make predictions because it is guesswork at best. I will share with you some general trends that I have read in case you are curious. Then consensus is that 2011 will be another solid year for the markets (low double digit gains much like this year) with US markets out performing international markets. Stocks will out perform bonds. Unemployment will improve but remain stubbornly high, the housing market could take another dip, commodities will continue to do well, and the small investor will return to buying stocks.

Prognostications are interesting, but I will continue to rely on relative strength analysis to direct my investment recommendations. As you know I have said consistently in 2010 that small and mid-capitalization stocks were outperforming and the Russell 2000 index (a small cap index) was up 26% compared to the DJIA which was up 11%. I have also consistently been saying that equal-weighted indexes were preferred over capitalization-weighted indexes. In 2010 the S&P 500 equalweighted index was up 19.8% compared to the S&P 500 cap-weighted index which was up 12.8%. So going into 2011 I will focus on what my technical analysis is telling me and that is:

· Small and mid-capitalization stocks are preferred over large-cap. · Growth is preferred over value investing. · Equal-weighted indexes are preferred over capitalizationweighted indexes. · US and International stocks are preferred over Bonds, Currencies, Commodities, and Cash. Commodities, however, are making a strong positive move and certainly be considered for portfolios if not already included. · Emerging markets are preferred over developed markets · Intermediate-term corporate bonds and emerging market bonds are preferred among bonds. · Real Estate, Consumer Discretionary, and Materials are the favored broad sectors.

Looking Ahead

I have no doubt that 2011 will be full of twists and turns and the unexpected. We live in interesting times, but I will let the pundits try and figure out where we will end 2011. While I will not make predictions, I will continue to make my recommendations on what is actually taking place. Relative strength analysis is not fool proof and I am the first to point out weaknesses such as when the markets were range-bound earlier in the year. But once trends take hold, relative strength analysis makes sure the strongest opportunities are identified and where investment decisions can be directed. I will continue to strive to provide you with up-to-date analysis of current economic news and provide you with sensible commentary.

I trust each of you had a wonderful holiday season and that you had a chance to share the season with family and friends. Stacy, Lisa, and our families were treated to the third greatest snowfall in Virginia Beach history and a very rare white Christmas. We came away with many adventures and stories. Travel was treacherous since the primary means of snow removal in Virginia Beach is sunshine and 33 degrees.

All of us at NTrust Wealth Management wish each of you a healthy and prosperous 2011.

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

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

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

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

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

Sincerely,

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

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

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

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

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

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