WHERE THE BULL MARKETS ARE

Breakouts. Everywhere we look in the commodity markets, we see breakouts.

Breakouts are one of the great "common sense" charting tools available to traders. It's simply when the price of a stock or commodity reaches a new high for a given period of time. No trend can start without one.

Here's this week's list of major commodity stock breakouts, aka, "where the bull markets are": BHP Billiton (world's largest mining company), Silver Wheaton (largest silver royalty company), Peabody Energy (largest public coal company), the Market Vectors Agribusiness Fund (food and fertilizer producers), Petrobras (Big Oil). And don't forget a fresh high in the Venture Index as well.

How about the commodities themselves? Try copper, gold, silver, and platinum. Crude oil, lead, aluminum, zinc, cotton, and sugar are within spitting distance of breakouts as well.

In addition to a bullish supply/demand picture, legendary investor Jim Rogers likes commodities because of the potential inflationary explosion the Federal Reserve is creating. As you can see from the chart below, he has the trend on his side.

A PICTURE OF THE ECONOMIC REBOUND

Score a victory for folks bullish on the global economy...

For a picture of this victory, we go to the past two years of action in the Baltic Dry Index. As we mentioned last month, the "BDI" is one of our favorite real world barometers of what's going on. It's the most widely followed gauge of the price it costs to ship raw materials like grain, coal, and iron ore.

The BDI fell 94% in just six months last year as credit – the oil of commerce – was drained from the global economic engine. It's the worst crash we've ever seen an index suffer. But like all economic indicators, the BDI is in rally mode right now...

After striking a bottom below 1,000 last December, the BDI rallied to 4,000 by June. It then corrected to almost 2,000 in September. But as you can see from today's chart, the BDI is set to reach a new 12-month high this week. As long as this index remains healthy, we have to say, "The economy ain't so bad..."

HOW THE RICH SEE THE RALLY

Our chart of the week shows why the rich, seasoned investor looks at the recent stock rally and shrugs his shoulders.

You see, the rich investor measures his gains not in the arbitrary value of government paper (dollars), but in real, honest money: gold.

This week's chart displays the 2009 return of the S&P 500 in terms of gold. Nominally, stocks are up big since May. But the U.S. dollar has plummeted in value... and the price of "real stuff" like crude oil, copper, and gold has soared. Measured in gold, stocks have drifted sideways for seven months... and are nearing a new short-term low.

We stand by what we said last month: Sure, dollars are flowing into stocks right now... but the yahoos running the controls in Washington D.C. are making those dollars worth less and less every day.

China shakes the gold industry: Rumored to be interested in major U.S. gold miner...

Newmont Mining (NEM), one of the world's biggest gold producers, has been on a tear lately. Its stock is up almost 20% in just the last week. Most are pinning the move on the company's great earnings at the end of October - third-quarter profits more than doubled as gold has risen above $1,000 an ounce... But there's also an interesting rumor behind the move.

Some on Wall Street are speculating China is looking to buy the U.S.-based company outright. It's no secret China has been on a buying spree for gold and other real assets, but this would mark its first attempt to buy a major gold company.

The rumor is unconfirmed at this point, and it's likely the U.S. government would get involved prior to a sale. But this type of news is certain to become more common as the world attempts to flee the dollar.

The 25 richest members of Congress

Did you know there are 238 millionaires in Congress?

That's according to a new study by the Center for Responsive Politics, which shows that more than 44% of Senators and Representatives are in the seven-figure club, compared to about one percent of all Americans.

Just as startling: 50 members of Congress boast estimated wealth of at least $10 million, according to 2008 data. And 7 are worth more than $100 million!

Overall, congressional median wealth...

HEALTH CARE: THIS WEEK'S UNLIKELY NEW HIGH

The star of this week's "unlikely new highs" department: the U.S. Healthcare Providers investment fund, symbol IHF.

IHF is a one-click way to invest in a broad swath of the U.S. heath care industry. Major holdings include Cigna (insurance), UnitedHealth (insurance), Quest Diagnostics (testing), DaVita (dialysis services), and Express Scripts (pharmacy management). The fund is up 35% in the past seven months and just registered a new 52-week high.

The conventional thinking is at odds with this price action. After all, won't the government's reform efforts drive down profits for anyone who gives a flu shot, performs a lab test, or asks you to fill out an insurance form? We asked medical stock expert Rob Fannon (editor of the Phase 1 Investor) for his take on the situation...

Rob says sure, reform may pressure profit margins. But remember how the ancient law of supply and demand works. The government could make health care "free" to tens of millions of people. When you make a product or service free, you create unlimited demand for it. That's why Rob recommends getting on board this trend. Profits may go down a bit, but if Washington's "free houses, cars, and health care" panderers get their way, a lot of new demand and revenue is headed toward IHF and its holdings.

Is It a Gold Bull Market or a Dollar Bear Market?

Which is it? A gold bull market? Or a dollar bear market?

Yes, you can have one without the other...

For example, gold soared 50% from early 2002 to early 2005 – but that was a dollar bear market, not a gold bull market. Let me explain...

Gold went from $280 to $420 an ounce in those three years. But in terms of euros, gold was exactly flat, at around 320 euros per ounce. So that was a bear market in dollars, NOT a bull market in gold.

So which is it today?

My simple definition of a bull market in gold is this: When gold is rising in terms of all four of the most widely traded currencies, you're in a gold bull market.

Today, we're in a gold bull market.

In each of the last three months (and in six of the last 11 months), gold has risen month-over-month versus all four major currencies: the dollar, the euro, the yen, and the British pound.

The numbers are astounding...

Since 1971, gold has risen against all four currencies month-over-month 31% of the time. If you simply hold gold during the month after that happens, the compound annual gain in gold is an astonishing 34%.

For the other 69% of the time (when gold didn't rise against all four currencies in the previous month), gold lost money over the next month. Extraordinary!

Last week, I showed you a simple gold indicator with some incredible results... I said, "Simple is elegant. A few minutes a year turned $10,000 into $1.28 million over 41 years, without any number gymnastics."

With that simple gold indicator, gold rises at a compound rate of 17% a year in "buy" mode.

With today's simple gold indicator, gold rises at a 34% compound annual rate after it's moved up against four currencies.

When you combine the two simple indicators, gold rises at a compound annual rate of 44%. Wow!

Granted, both indicators are rarely in "buy" mode at the same time – it's happened 26% of the time since 1971. But importantly, we're in "buy" mode in both indicators right now...

It's no surprise gold is soaring right now.

But to answer the question at the beginning... Is it a bull market in gold? Or a bear market in the dollar?

The truth is, unlike 2002-2005, it's both... It's a bull market in gold, AND a bear market in the dollar. The U.S. dollar has dropped nearly 15% since March against an index of the euro, pound, and yen.

Both of our simple gold indicators are in "buy" mode... and both have incredible track records. There's no hurry to sell your gold yet.