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.

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

Happy New Year! I hope that each of you had a wonderful holiday season and had the opportunity to spend time with your families and friends.

2011 Review

If someone was looking at the annual return data for 2011 some 10 or 15 years from now, they could easily reach the conclusion that 2011 was a quiet year. The Dow Jones Industrial Average (DJIA) was up a modest 5.53%. The broader S&P 500 index ended just four-hundredths of a point lower than where it started, while the Russell 2000 gave back 5.45%. However, for those of us who experienced 2011 it was anything but quiet. The year will go down as one with periods of extreme volatility and where the terms "risk on" and "risk off" became part of our daily conversation. The US economy continued to struggle with minimal economic growth despite the Federal Reserve's ultra-low interest rate policy. High unemployment, a depression-like housing market, and the continual overhang of the European debt crisis all contributed to a volatile but lackluster year.

Gains within the US equity markets were found in several major economic sectors. The Utilities sector led all sectors with a gain of 14%. The Consumer Staples and Health sectors also exceeded the DJIA return for 2011. At the other end, Financials remained in last place losing over 14% for the year. Materials, Telecom, and Industrials round out the bottom four performing economic sectors losing between 11% and 4%.

International markets all had sizeable setbacks. The European debt crisis was the dominant economic story both here and abroad. The European-heavy MSCI EAFE index fell 14.82% and emerging markets did even worse. The four countries that make up the largest part of the emerging markets group, Brazil, Russia, India, and China were down 24%, 21%, 39%, and 20% respectively.

Commodities were mixed in 2011. Gold, even with its December pull back, posted a $147 per ounce gain (10.4%) for the year and WTI Oil added $7.61 per barrel (8.3%) while most other commodities were down. Natural gas was the biggest loser posting over a 50% drop followed by cocoa and most of the base metals (i.e. tin, copper, and nickel). The DJ UBS Commodity index, which measures the performance of a broad basket of currencies, was down 13.4% for the year.

Currencies made a lot of noise last year but there were no significant moves among the big three-US Dollar, Japanese Yen, and European Euro. The Yen was the strongest currency gaining about 5% while the Euro lost just over 3%. The Indian Rupee was one of the worst performing currencies losing about 24% for the year.

The strongest performing major asset category in 2011 was bonds. The sharp drop in US Treasury yields made long-term US Treasuries the best performing sector along with Treasury Inflation Protection Notes (TIPS). Most other bond sectors also performed well with gains between about 2% and 10%. Only the preferred sector posted a small loss among the bond sectors.

2012 Begins

The first week of 2012 kicked off with another 2011-like choppy performance. The DJIA opened the week strong followed by somewhat indifferent trading. For the week, the DJIA posted a 1.2% gain. The S&P 500 added 1.6%, and the Russell 2000 gained 1.2%.

Sector performance saw the recent ranking of the major economic sectors more or less reverse. Materials, Financials, and Consumer Discretionary were the best performing sectors while Utilities, Telecom, and Consumer Staples were the worst.

The MSCI EAFE posted a 0.4% loss while the emerging market sector posted a nice 1.5% gain. As the European equity markets continued to weaken so did the Euro closing at $1.27 a 15-month low to the US Dollar.

Commodities were also up with the DJ UBS Commodities index gaining 1.3%. Gold saw a strong gain of $50 an ounce to close at $1616.80 (3.2%) and WTI Oil added $2.73 per barrel to close Friday at $101.56 (2.8%).

The Barclays Aggregate Bond index fell 0.15% with long-duration US Treasuries pulling back as interest rates edged upwards slightly. The 10-year US Treasury yield closed Friday at 1.957% up from the previous week's close of 1.871%. The best performing sectors within the bond category were Preferreds, High Yield, and TIPs while long-duration US Treasuries, International, and Emerging Market bonds were the weakest.

LOOKING TOWARDS 2012

Trying to predict the future is a futile effort at best. I happen to like the way Scott Adams, the author of the Dilbert comic strip puts it: "There are many ways of predicting the future. For example, you can read horoscopes, tea leaves, tarot cards, or crystal balls. Collectively, these methods are known as "nutty methods." Or you can put well-researched facts into sophisticated computer models, more commonly referred to "as a complete waste of time." As funny and on target I happen to believe Mr. Adams' observation is, there still must be an effort to recognize what potential challenges lie ahead and make smart investment decisions now and then adapt as the future comes closer to the present.

I see three major themes that will challenge and influence investors for 2012:

1) The European debt crisis will remain front and center in the news and will exert enormous influence over the global economy. Europe is likely to move into a recession if it is not there already. 2) US political gridlock will confound investors as businesses and individuals try to determine which direction major economic policies will move. The specter of the presidential election in November will preoccupy Washington. Additionally, the growing US debt is becoming increasingly troublesome. 3) Geopolitical risks abound. The greatest threat emanates from Iran and the threat the pose to regional instability and oil supply interruption.

The impact of these challenges, in my opinion, will be to subdue economic growth. One of the smartest money managers, Bill Gross of PIMCO Funds, wrote this week that in 2012 "investors must lower their return expectations. 2-5% for stocks." In addition to a lower market return expectation, unemployment will continue to be abnormally high, households and countries will continue to deleverage, and interest rates will be historically low for the next few years.

So what is an investor to do? I will be emphasizing the following themes in my investment decision making:

1) Focus on companies and countries with strong balance sheets. This means that I am continuing to avoid most international investments for now. I do like global infrastructure investments and will certainly consider selective investments abroad. 2) Favor high yielding stocks and bonds. If the overall expected return of stock markets is going to be between 2% and 5% stocks with an equivalent dividend yields become more attractive. Selective municipal bonds appear attractive from a yield perspective. 3) Consider alternative investments. Please contact me if you have questions about what types of investments fall within this category. 4) Maintain flexibility. Buying and forgetting is not an investment strategy. There is too much risk for the markets to go off the rails or surge, so investors must stay focused on their portfolios.

LOOKING AHEAD

The economy is improving, but not nearly as fast as people would like. Consumer sentiment rose for the fourth month in a row in December. Initial unemployment claims have started to fall off rapidly and the unemployment rate is starting to decline. However, there are still many obstacles to growth that are preventing us from seeing a better business environment.

A broad review of US markets today is that they are just slightly over-valued. While consumer sentiment may be improving, investor sentiment remains poor. This translates into volatile markets because investors lack the confidence to hold their investments on negative news. When trends begin they are quickly squashed by a new headline. Therefore, it is very difficult to pick winners or losers so I am suggesting a more balanced approach to "risk on" and "risk off" assets. While my relative strength analysis still favors mid-capitalization growth stocks, large cap stocks have shown the strongest near-term momentum. I believe that you should consider building a fairly broad allocation of US stocks within your targeted allocation for stocks.

I continue to suggest significantly underweighting international stocks for now. The Euro's weakness has created strong headwinds for commodities as the strength of the US dollar curbs international demand. I have favored commodities for most of 2011, however, I believe that commodity positions should be scrutinized and possibly trimmed moving into 2012.

Within the bond category I favor TIPS and international bonds. I also like exposure to high yield, floating rates, and quality corporates.

Again I want to wish all of you a very Happy and Prosperous New Year!

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.

The first three days of December saw the Dow Jones Industrial Average (DJIA) rally 814 points (7.25%) following a coordinated announcement by western central banks that they were increasing liquidity for financial institutions around the world. This important step immediately calmed nervous investors who saw Europe rapidly approaching a Lehman Brothers moment as banks severely curtailed inter-bank lending. Interest rates fell sharply in Italy and Spain and equity markets rallied everywhere. Since then, equity markets have calmed considerably as investors digest the latest agreements emerging from the European Union (EU).

For the week, the DJIA gained 165 points (1.37%) and the S&P 500 added 0.88%, and the Russell 2000 led all major indexes with a 1.41% increase. For the year, the DJIA is now up 5.24%, the S&P 500 is still in negative territory down 0.19%, and the Russell 2000 remains off 4.88%.

Sector returns were mixed last week. Real Estate, Financials, and Information Technology were the leaders while Telecom, Materials, and Energy were the worst performing sectors. The difference between the best and worst performing sectors was just over 1.75% reflecting a lack of investor certainty about the markets. For the year, Utilities, Consumer Staples, and Health Care are all positive and exceeding the DJIA, while Financials, Materials, and Telecom are the worst performing sectors. Financials remain down over 15% so far in 2011.

European markets were flat last week. The MSCI EAFE index lost 0.89% and is up a marginal 0.06% so far in December. For the year, the European-heavy MSCI EAFE index is down nearly 14%. Globally, the Pacific Region leads with Thailand the best performing country in December. For the year, the US is significantly outperforming all major global regions. The Americas is down 3.40%, Europe is down just over 14%, Africa/Middle East is down nearly 20%, and the Pacific Region is down about 17%.

The Euro was virtually unchanged against the US dollar last week giving back a mere $0.001, and for the year is up just $0.001. The Euro has been under pressure since closing above $1.40 in late October as the Euro crisis depended, and even though the Euro off its lows in late November, the latest efforts by the EU has failed to create another strong Euro rally.

Commodities were generally negative last week. The Dow Jones UBS Commodity Index was down 2.26% as gold fell 1.73% and WTI oil gave back 1.70%. Natural gas and cocoa were the biggest losers last week while base metals (tin and lead) managed good returns. For the year, gold and precious metals have outdistanced all other commodity returns while natural gas, cocoa, and base metals have all significantly underperformed the broader commodity and equity markets. Commodities, other than precious metals, reflect global growth expectations and as economic growth remains subdued, commodity prices remain subdued as well.

Bond markets have seen several weeks of modest gains. The US 10-year Treasury yield rose slightly last week from the previous week's close of 2.042% to Friday's close of 2.065%. However, the bond markets are also reflecting investor uncertainty as the Euro debt crisis plays itself out in Brussels. Like US sector performance, there was a fairly tight dispersion of returns between the various bond sectors with preferreds, intermediate-term municipals, and high yield leading the way while long-duration Treasuries and Inflation Protection were the worst performing sectors. For the year, long-duration Treasuries lead all bond sectors while preferreds and high yield are the worst. All of the major big four European countries: Germany, France, Italy, and Spain saw interest rates fall even though Italy and Spain have rates considerably higher than Germany and France. Standard & Poors has placed 15 of the 17 Euro Zone countries under review for downgrades early in the week and also placed several major European banks under review. No doubt this news helped to push EU member countries to move closer to a unified financial organization.

GROUND HOG DAY?

I am getting tired of writing about the EU debt crisis and you are probably getting tired of reading about it. However, because of the impact the EU debt crisis has on all financial markets, I have continued to remain focused on what is going on across the Atlantic.

I am suffering from writer's fatigue because it every week seems to be just more of the same. The bond markets throw a temper tantrum, interest rates jump, and then EU leaders come together announcing that this time they must get things fixed. After much deliberation, the EU ministers walk away from the table announcing that they have taken new strides to address the problem, markets jump, and then after investors have time to dig into the details, the markets pull back and we repeat the cycle...wash and rinse, wash and rinse, wash and rinse is how I have characterized this process. I cannot get the image of Bill Murray's character in the movie Ground Hog Day out of my mind.

Last week, the EU did make some important strides towards fiscal union as every EU member, except Great Britain, agreed to subject their individual country's budgets to greater EU oversight and control. Each of these country leaders must now go back to their respective parliaments and get legislative changes passed to implement these new agreements. In the meantime, the European Central Bank (ECB) under new leadership has shown a greater willingness to help out the region in the short-term by lowering interest rates for the second time to 1.0%, offering unlimited 36-month credit to EU banks, and cutting the reserve requirements for commercial banks from 2% to 1%. In sum, these changes are all a positive step, however, as investors have been burned before, there was not a rally in the stock markets.

I believe that the debates that are underway in the EU are long overdue. The British were never fully enamored with EU. They never surrendered the Pound for the Euro, and Prime Minister Cameron was the only EU member to not vote for the new fiscal controls. This has caused old conflicts to resurface as Der Spiegel said that "the British still hadn't finished mourning over their lost empire," and "instead of turning toward Europe, Britain looked west to the US... (a)nd to this day, the UK feels much closer to America than it does to the frogs and the krauts on the other side of the English Channel." Rather strong rhetoric coming from Berlin, but I think the German's are forgetting the price the British paid in blood and treasure (and the help provided by the US) to defeat the likes of the Kaiser and Hitler which is still in the minds of many Britains. So considering the history of the 20th century in Europe, it is understandable that the British do not want to give up sovereignty to the folks across the Channel.

So as we wait and see about the latest version of EU fixes I continue to watch for prospects of economic growth in the EU. With all of the attention focused on unified fiscal policies, the structural impediments to long-term growth remain firmly entrenched. The International Monetary Fund is estimating EU growth for 2012 at an anemic 1.3%. We can only wonder if the political leadership in Europe understands that the real crisis in Europe is spending growth that substantially exceeds economic growth. A situation that we must also be concerned with here in the United States.

LOOKING AHEAD

The past six months in the markets have been driven by headlines emanating from Europe. We often hear commentators discussing "risk on" and "risk off" days. I discussed this concept in an earlier Weekly Update (October 28, 2011). A quick summary:

On days when Risk is On we generally see the following:

Stocks UP US Bonds DOWN International Bonds UP Commodities UP US Dollar DOWN

On days when Risk is Off we generally see the opposite:

Stocks DOWN US Bonds UP International Bonds DOWN Commodities DOWN US Dollar UP

Risk on or off is going to be determined by how successful the EU is at implementing the latest policy goals and re-establishing confidence in their sovereign debt. The jury is out and I would have a 50-50 chance of being right on predicting which scenario might prevail. The non-directional market this past week is just another indicator of the uncertainty felt by investors.

I do not believe that leaving the equity markets is fully warranted and continue to retain exposure to stocks, however, I continue to underweight European equities. So how do you look at the markets today with all the uncertainty? I believe a balanced approach is warranted. This means building a portfolio with both risk on and risk off assets.

I maintain that there should continue to be exposure to growth stocks, especially within the mid-capitalization space (risk on), however, I also believe that high quality blue chip stocks paying good dividends is a less risky option for equities (partial risk off). In the bond space, I favor a good blend of US (risk off) and International bonds (risk on), exposure to inflation protection (risk on), and high yield (risk on). While Commodity exposure provides a hedge against inflation (risk on).

The upcoming week will include several important reports from the federal government which should provide assessments about the current state of the US economy including: Retail Sales (Tuesday); Jobless Claims, Producer Price Index, Industrial Production, and the Philadelphia Fed Survey (Thursday); and the Consumer Price Index (Friday). Retail sales will be particularly important because it will include the first full week of holiday shopping.

As the year draws to a close expect the bumpy ride to continue. I am continually assessing investments to insure that they are technically and fundamentally sound. Give me a call if you have any questions.

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 everywhere suffered from the unrelenting negative news coming from the Euro Zone last week. The key headline was the poor auction results of a German bond offering this past Thursday. According to the Wall Street Journal, only €3.644 billion ($4.82 billion) out of an offering of €6 billion ($7.94 billion) of new debt was purchased causing shock waves across global markets. Doubt is gathering like a storm on the horizon about whether or not global leaders can remain ahead of their debt problems before private bond investors simply stop absorbing the massive debt issuance from heavily indebted countries. The failure of the Super Committee here in the US did not add any confidence to investors.

Headlines in the financial media described the last full week of November trading as the worst Thanksgiving week for the Dow Jones Industrial Average (DJIA) and the S&P 500 since 1932 on a percentage basis. The DJIA lost 564 points (-4.78%), the S&P 500 lost 57 points (-4.69%) and the Russell 2000 gave back another 7.39%. For the month, the DJIA is now off 6.09%, the S&P 500 is off 7.55%, and the Russell 2000 has pulled back 10.10%. All major indexes are negative for 2011. The Russell 2000 leads all major indexes down 14.99%, followed by the S&P 500's loss of 7.87%, and the DJIA is now down 2.99% for the year.

Every major US economic sector was negative for the week. Consumer Discretionary, Health Care, Utilities, and Consumer Staples managed to outperform the DJIA while Energy, Materials and Financials were the bottom three performing sectors. The divergence between the best and worst performing sectors was slightly more than 4% marking a relatively tight spread. For 2011, Utilities, Consumer Discretionary, and Health Care remain positive while Financials, Materials, and Industrials are the worst performing.

European markets continue to be under significant pressure. For the week, international stocks, as measured by the MSCI EAFE index, lost 5.66%. For the month, the index is down 12.2%, and for the year, it has lost 20.33%. This index has about 72% exposure to European companies and 28% weighted to Asia, principally Japan. Emerging markets continue to suffer along with developed countries and have lost about 5% more on average than developed countries.

The Euro continued to falter losing nearly three cents to the US dollar closing last Friday at $1.324. The move away from the Euro and to the US dollar reveals the lack of confidence investors have in the Euro and is at its lowest point versus the US dollar since October 3, 2011. A close of $1.30 or lower will provide a sell signal for the Euro against the US dollar.

Commodity markets remain in a negative trend. In addition to a stronger dollar hurting commodity prices, the general global economic contraction is hurting all commodity prices. Making headlines on the second and third pages of many financial outlets is the growing fear of a general European recession. Austerity measures, and the likelihood of coming government spending cuts, is hurting economic outlooks throughout Europe and commodity demand is falling as a result. The Dow Jones UBS Commodity index, a broad basket indicator of commodity prices, fell 2.18% last week, is down 5.18% for the month, and for the year it is off 12.72%. Natural gas, livestock, and energy were the best performing commodity sectors while base metals, timber, and broad agriculture were the worst last week. For the year, gold and precious metals have significantly outperformed all other commodities with energy also doing well. Natural gas, base metals, and timber are the worst performing sectors for 2011.

European bond markets tell the story of the severe problems facing European countries. As of market close on Friday, the Italian 10-year bond surged to close at 7.26% up from the previous week's close of 6.64%. Spain's 10-year jumped about 0.32% and the French 10-year added about 0.22% to their rates. Most worrisome was the spike in the German 10-year rate, which went from 1.967% the previous Friday to close last week at 2.263% (0.296%), pushing the German rate above the US 10-year Treasury rate (1.964%). Coupled with the falling Euro, rising US dollar, and flip between the US 10-year rate to the German 10-year rate, the private bond markets are clearly telling political leadership in Europe that little time remains to effectively address their problems. Long duration and middle duration US Treasuries were the best performing bond sectors last week while high yield and preferreds were the worst.

THE EVOLUTION OF THE EUROPEAN DEBT CRISIS

The European debt crisis has been in the headlines for almost two years now. Markets have ebbed and flowed based upon investor perceptions about how effectively the Euro Zone's political class has been dealing with the issue.

In the beginning it was a concern that Greece would have some difficulty tapping into the private bond market to continue financing its debts. The European Union (EU) stepped forward to create a bailout facility to help Greece keep borrowing costs under control. Greece assured the EU that it would implement effective austerity measures to bring its spending down to a reasonable level. When it became apparent that Greece could not or would not meet spending cut targets, the EU (primarily Germany and France) stepped forward and called for limits to additional funding for Greece without definitive progress. In the meantime, Ireland and Portugal both fell under the bond market's glare and they too required funds from the EU bailout facility to keep from defaulting on its debt. At this point, investors quietly started voicing concerns about Italy and Spain. Over time, investors realized that Greece would eventually default on its debt. This prompted another round of intense negotiations and a voluntary haircut by Greek bond holders of up to 50%. The general perception during all of this was that the Germans and French would do everything in their power to keep the Euro a viable currency. Today, there are growing concerns that this might not be possible.

Headlines over this past weekend indicated that individual countries were now looking at the impact of the dissolution of the Euro. What a difference even a few months makes! Whether it is a few countries that leave the Euro and return to their former currencies or whether the entire Euro project is abandoned is uncertain at this time. The impact this would have on the markets is also uncertain and it is all this uncertainty that is hurting equity markets. There has never before been a time when countries surrendered their sovereign currencies for a common one so there is no blueprint about how to deal with a possible decoupling.

The Germans in particular are strongly suggesting that an enhanced federalist approach to EU fiscal policy is necessary. I agree. The problem is that the treaties forming the EU do not have a mechanism to do this. Nor does the European Central Bank have the authority to start buying sovereign debt on a wholesale level like our Federal Reserve did in 2008. There are calls for the International Monetary Fund (IMF) to step in and provide funds to the European Financial Stability Facility (EFSF) for the same purpose. This option has been suggested because the Chinese and others with currency reserves have been unwilling to step forward and provide additional funds. Ironically, if the IMF does this ECB end-around, the US and Chinese will be indirectly financing the EFSF-not something most Americans or Chinese would like to see.

There is no assurance that the EU's political leaders will stay ahead of the bond markets. However, I would not dismiss this possibility. They will do everything in their power to get this situation under control and if they do, expect the markets to rally after last week's sell-off. In the meantime, be prepared for more of everything for the foreseeable future.

LOOKING AHEAD

Besides the trouble in Europe, several geopolitical problems need watching. Over the weekend, the NATO bombing of several Pakistani outposts has seriously hurt US-Pakistani relations and further destabilized that part of the world. Additionally, there were reports over the weekend that an official of the Iranian government said it would attack US missile defenses in Turkey and Israeli nuclear facilities if Iran were attacked. Besides the global threat of violence that would come from any military action, the supply of oil could be severely restricted and prices could skyrocket-at least in the short term.

I will be watching the European debt crisis closely. It will be important to see how the bond markets (seen through bond rates) respond to the efforts of the EU leaders as they push for treaty adjustments and what the IMF does. I do not think anyone knows how this crisis will play out either the short-term or long-term.

The New York Stock Exchange Bullish Percent (NYSEBP) continued to retreat over the past week falling to a level of 43.85% with supply still in control. This reflects a drop in overall risk in the markets from several weeks ago. Remember the analogy I like to use to illustrate the NYSEBP is that of a tight ropewalker, as the NYSEBP falls, it is like the rope getting closer to the ground meaning that there is less risk to injury if the ropewalker falls off during his walk.

Among the major asset categories I follow, US stocks remains first. Commodities and Currencies are at a virtual tie at second and third, Bonds are fourth, Cash fifth, and International Stocks is last. US stocks now fail the cash bogey check, however, that is not surprising given the recent drop in stocks.

Within US equities, mid capitalization growth stocks are the strongest on a relative strength basis. Equal-weighted indexes are preferred over capitalization-weighted indexes. I believe that high quality; large capitalization dividend paying stocks present a compelling story and appear to be showing strength as a defensive investment. Within sectors, Utilities and Consumer Staples are showing the best relative strength. I anticipate that volatility will continue during these uncertain times.

I continue to like gold and commodities in general. Gold for uncertainty and commodities as an inflation hedge. On a relative strength basis, Agriculture and Broad Basket commodity categories are favored.

Within the bond asset category, International Bonds and Inflation Protected Bonds remain favored.

There are several important economic reports coming out this week. The most important is the Unemployment Situation report on Friday morning. The consensus is for the unemployment rate to remain steady at 9.0% with a slight uptick in new jobs. Other reports key reports include the Consumer Confidence index on Tuesday, and the Initial Jobless Claims and ISM Manufacturing Index on Thursday. As has been the case in prior weeks, investors are looking for signs of economic growth in the US.

It appears that volatility is here to stay for now. I understand how this stresses every investor. I remain committed to investing in securities with high technical attributes, keeping allocations between stocks, bonds, and other investments in a range that allows you to sleep at night, and remember that investing is not a moment-to-moment exercise. If you have any questions about the current environment or your portfolio, please call me.

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

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 around the world remained in limbo this past week as politicians pontificated and postured. Yet with all of the seemingly determined efforts, investors see governments no better off and making little effort to seriously deal with the problems facing them. Only reluctant and minimal intervention by the European Central Bank to purchase European sovereign debt kept the situation in Europe from coming completely unglued.

The third trading week in November saw the Dow Jones Industrial Average (DJIA) give back 358 points (-2.94%) with three negative sessions out of five. The S&P 500 lost 3.81% and the Russell 2000 dropped 3.39%. For the month the DJIA is down 1.33%, the S&P 500 is off 3.00%, and the Russell 2000 is down 2.92%. With only six weeks left in 2011, the DJIA is up 1.89% for the year. The S&P 500 is down 3.34% and the Russell 2000 is off 8.20% for 2011.

All eleven major US economic sectors were negative for the week. Consumer Discretionary and Utilities were the top two performing sectors and managed to beat the DJIA. Financials, Energy, and Health Care were the bottom three sectors. For the year, Utilities, Consumer Discretionary, and Health Care are the top three sectors and are all ahead of the DJIA. The bottom three sectors are Financials, Materials, and Telecom. As noted in previous Updates, Financials is the worst performing sector by a wide margin reflecting investor concerns about uncertain exposure to the European debt crisis and the mortgage-debt overhang on bank balance sheets.

For the week, international stocks, as measured by the MSCI EAFE index, managed to outperform the US by losing just 1.64%. However, for the month, the MSCI EAFE is off 6.94% and for the year, it is down 15.55% significantly underperforming US markets. This brings me to another point. As of market close last Friday, the US is out-performing most of the world. Markets are down all around the globe. Russia is off 14%, China is down nearly 20%, India is down 32%, and Brazil is off 22%. Each of these countries may have its own explanation for such a poor year, but in total, we are seeing a tough investment environment everywhere.

The Euro weakened compared to the US dollar for the third consecutive week falling over 2 cents to close Friday at $1.352. Again, the story is the same. Fears over European debt has pushed investors to the US.

Commodity markets have become mixed and uncertain. In a week where US economic data was a little less bad than expected and the Conference Board's Index of Leading Economic Indicators posted a stronger than anticipated 0.9% gain for October, conventional wisdom says commodity prices should have moved upwards on future demand expectations, but just the opposite occurred. The Dow Jones UBS Commodity Index, a broad basket of commodities, fell 2.71% for the week. Gold lost $59.70 per ounce (-3.34%) and WTI Oil lost $1.81 (1.81%) per barrel. Lead and livestock were among just a handful of commodities to post gains.

Bond markets were little changed. Extended duration US Treasuries was the best performing sector while High Yield and Inflation Protection notes were the worse. All bond sectors out-performed the broad equity markets. The 10-year US Treasury yield fell last week to close at 2.003% compared to the previous week's close of 2.052%. The Barclay's Aggregate U.S. Bond Index closed Friday up 0.01% for the month and is now up 7.37% for the year.

WASH AND RINSE, WASH AND RINSE, WASH AND ..............

As I reviewed the many news reports of the previous week in preparation of this week' Update, I was struck by how little had changed in context or tone from earlier weeks. I am not suggesting that the political class is not working hard to stay ahead of the various problems confronting their countries, but I am saying that they are making no progress.

Interest rates in Italy pushed above7% for their 10-year treasuries until the European Central Bank(ECB) stepped in and brought rates down to 6.64% through open market bond purchases. As of the end of May, the ECB had bought €75 billion ($101.4 billion) of European sovereign debt, as of the end of October that number has jumped to €173.5 billion ($234.6 billion). These purchases have given politicians more time to achieve some kind of effective and meaningful structural reforms in dealing with the debt crisis. I am not sure, however, that any meaningful reforms have actually been achieved. To buy even more time, a louder chorus of voices is asking the ECB to greatly expand their bond purchases. The ECB has fought off efforts to expand its role since the treaty organizing the ECB does not allow for this type of activity. No agreement or solution appears imminent.

Here in the US the Super Committee has failed to reach an agreement in meeting its mandate to cut $1.2 trillion from the US deficit over the next 10 years. Unless there are some late night heroics, I am extremely doubtful that an agreement will be reached and the automatic cuts will be implemented beginning in 2013. In the meantime, the US debt crossed over the $15 trillion mark and this country adds $4 billion in new debt every day! The markets will no doubt see our government as fundamentally unable to govern itself responsibly.

So another week has gone by, and there is nothing new to report. The markets remain range-bound and surge or fall on the slightest innuendo or rumor. At least here in the US, the formal deadline of the Super Committee of November 23rd will force an outcome, but failure to achieve any deal at all will leave the markets with little confidence that our government has the ability to govern itself responsibly.

LOOKING AHEAD

The momentum in the US markets has shifted from demand to supply. Put another way, sellers are currently in control. The New York Stock Exchange Bullish percent (NYSEBP) has slipped into a column of O's and presently has a value of 55.16. This "middle of the field" position matches the 10-week distribution of prices which suggest that the market in general is fairly priced, neither over-bought or over-sold. A move by the S&P 500 below 1190 would be problematic and represent a violation of near-term support.

There has been no change in any of the major technical indicators that I follow other than the NYSEBP reversing back into a column of O's (supply in demand). Markets are range bound and investors are reacting daily to the latest headlines coming out of Europe or Washington. Spain appears to be in the process of replacing the Socialist Party with a more conservative one marking the third major leadership change recently in the European Union.

Among the major asset categories I follow, US stocks remains first. Commodities and Currencies are at a virtual tie at second and third, Bonds are fourth, Cash fifth, and International Stocks is last.

Within US equities, mid capitalization growth stocks are the strongest on a relative strength basis. Equal-weighted indexes are preferred over capitalization-weighted indexes. I believe that high quality; large capitalization dividend paying stocks present a compelling story and appear to be showing strength as a defensive investment. Within sectors, Utilities and Consumer Staples are showing the best relative strength. I anticipate that volatility will continue during these uncertain times.

I continue to like gold and commodities in general. Gold for uncertainty and commodities as an inflation hedge. On a relative strength basis, Agriculture and Broad Basket commodity categories are favored.

Within the bond asset category, International Bonds and Inflation Protected Bonds remain favored.

This coming week will be shortened due to the Thanksgiving holiday. All weekly key economic reports will be released by the late Wednesday. On Monday Existing Home Sales will be announced at 10 AM EST; Tuesday will see the most important report with the first revision to the 3rd Quarter GDP figure; and Wednesday is set for Initial Jobless claims, Durable Goods Orders, Consumer Sentiment survey, and Personal Income and Outlays.

Traditionally trading volumes will decrease as the week progresses. This does not mean that wide swings will not occur, but on smaller and smaller volume, these moves do not have the same significance as they would on more typical trading days.

I want to wish everyone a very Happy Thanksgiving. I sincerely hope that each of you have the opportunity to share the holiday with your families and friends and that each of us take a moment to remember how much we all have to be thankful for in these turbulent times. Please take a moment to think of our soldiers, sailors, marines, and airmen around the world who cannot be home with their families so we may enjoy the special liberties their sacrifices afford us. May God Bless them.

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.