A FULL MOON AND FRIGID TEMPS IN THE MIDWEST weren’t enough to stop Bonds in their tracks, as they finally advanced past several tough layers of technical resistance last week. But home loan rates were largely unchanged for the week – Why? Just as Bonds had started to make some advances that could bring lower rates, they screeched to a halt and pulled back on Friday. Let’s take a closer look at what happened.

First, remember that in general, weaker than expected economic news causes Bond prices and home loan rates to improve, while positive economic news causes Bond prices to worsen and rates to rise. The early part of last week brought some disappointing reports, including a surprisingly higher number of people filing for unemployment benefits, as well as news of an all-time high in the US Trade deficit. But Friday brought a bag of positive economic news, especially for the beleaguered manufacturing sector. This caused Bond Traders to pull some profits off the table, and wait and see if the Consumer Price Index Report due next Wednesday will shed some light on the inflation picture.

IS IT NECESSARY TO DO SEVEN-MINUTE ABS AND SKIP A DOUBLE CAPPUCCINO IN ORDER TO BOOST YOUR RETIREMENT PLAN? PROBABLY NOT, BUT IT’S HEALTHY AND YOU MIGHT LIKE THE TASTE. EITHER WAY, CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW, TO UNDERSTAND THE NEW RULES IN PLAY FOR IRA’S, AND HOW YOU CAN RESOLVE TO SAVE MORE MONEY FOR YOUR FUTURE RIGHT AWAY!

So Bonds managed to muscle past some very tough resistance during the week…but Friday saw some weakness. Can Bonds hold their ground? Let’s take a look at the chart below. The “candle” on the far right is red, meaning that Bonds closed lower than they opened for the day. While home loan rates probably didn’t move higher across the board, additional weakness ahead would definitely cause a change for the worse, especially if Bonds penetrate below the 100-day Moving Average illustrated below. This technical level was tough for Bonds to break above…and it will be interesting to see if they can hold their position this week.

Just like Lex Luthor to Superman, the Joker to Batman…Inflation is the arch-enemy of Bonds and home loan rates. A mortgage is a Bond. The holder of that Bond, or the lender, receives the monthly payments made by the borrower. Since the payments are typically fixed, their value to the lender diminishes over time due to inflation. This is because the Lender will not be able to buy as many good and services with today's dollars in the future.

So next Wednesday’s Consumer Price Index (CPI) Report will be looked at very closely as an indicator of inflation. If the CPI Report shows strong signs of rising prices and inflation, Bonds will likely dip, duck, dive and dodge back below the 100-day Moving Average, and home loan rates could worsen slightly. If the Report eases inflationary concerns, Bonds will likely hold the line, and perhaps bring some improvement in home loan rates.

Bottom Line: Wednesday’s CPI Report and its news of inflation will likely dictate direction for home loan rates this week.

THE NEW YEAR… it brings hope of getting fit and strong with only seven minutes of exercise every morning, losing ten pounds instantly by replacing just one meal a day with a protein shake, building a healthy portfolio just by forgoing that one double mocha cappuccino you enjoy a few times a week and stashing the savings. But wait – you love the taste of that double mocha cappuccino. Is it necessary to give it up? Aren’t there other ways to save?

One of the best is by taking advantage of all the benefits of establishing an IRA (Individual Retirement Account). But did you know the rules change over time? Here are the latest updates on IRA accounts for 2005…and remember you’ve still got time to contribute for 2004. Give yourself a well-deserved tax break by seeing your trusted financial advisor before April 15th, or call me if you need a recommendation!

For Traditional and Roth IRA’s, the maximum contribution limit has increased to $4,000 in 2005, from a maximum $3,000 in 2004. Additionally, workers who are age 50 or older before the end of 2005 will be able to “play catch-up” by making increased annual contributions as well.

For a Traditional IRA, contributions are generally tax-deductible, but are subject to retirement plan participation status (such as a 401k), and Adjusted Gross Income (AGI) limits. For 2004, you can deduct the full amount of a contribution, even if you participate in a retirement plan such as a 401k, as long as your AGI for 2004 is $65,000 or less for a couple filing jointly, or $45,000 or less for any average Joe single filer. Partial deductibility is allowed for AGI up to $75,000 for joint filers and $55,000 for single filers.

For the 2005 tax year, the full deductibility limits are raised to $70,000 or less for joint filers and $50,000 or less for a single filer. Partial deductibility AGI limits are raised to $80,000 for joint filers and $60,000 for single filers.

Remember that contributions made to a Roth IRA are after-tax dollars, and therefore not eligible to be deducted.

Thinking of taking money out of your IRA? Whoa, whoa, whoa…wait a second sport! It’s usually not a good idea to withdraw money early from an IRA; after all, it is there for your future. And for a Traditional IRA, all earnings and deductible contributions are usually subject to income tax and penalties upon withdrawal. For a Roth IRA, your own contributions can be withdrawn at any time without paying taxes or penalties. Your investment earnings can even be withdrawn without incurring taxes and a penalty if certain conditions can be met.

Traditional IRA account holders are subject to an early withdrawal penalty of 10% if they are under age 59½, but there are certain exceptions:

For Roth IRAs, contributions can be withdrawn at any time without penalty. For earnings, a penalty applies if you are under age 59 ½ and the withdrawal does not qualify as:

TAKE ADVANTAGE OF ALL THE BENEFITS OF CONTRIBUTING TO AN IRA ACCOUNT…BUT BE SURE TO CONSULT A FINANCIAL PROFESSIONAL BEFORE MAKING DECISIONS. IT’S YOUR HARD EARNED MONEY – INVEST IT WISELY.

This week’s economic calendar has a few heavy hitters with potential to impact the Bond market and home loan rates. The big ones to watch for this week are the Consumer Price Index (CPI) and its inflation data on Wednesday and the Philadelphia Fed’s Manufacturing Index on Thursday.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

For the week of January 17 – January 21