This ratio is simply the closing price of the DJIA divided by the price of one ounce of gold. Last Friday, the DJIA closed at 8280 and gold closed at $911 per ounce resulting in a ratio of 9.08. The number by itself appears meaningless, but observing it in a time sequence presents an interest story and "frame of reference".
The concept of the ratio is that the DJIA is an inflated and manipulated index that does not necessarily present an accurate value of the market. Historical charts illustrate that the DJIA is heavily influenced by the money supply (M3). Gold, many believe, to be a "less manipulated" price that has historically held value for thousands of years. Thus, the ratio possibly presents an index with a more accurate view of historical cycles. Aligning these data with other variables and historical events generates some very interesting conclusions. This chart will be used as a "frame of reference" for many posts in the future. The first conclusion that can be made is that "the bottom" could still be very far off based on a comparison to historical "market bottoms". Stay tuned.
A PDF can be downloaded from the Random Roving Document Archive: http://sites.google.com/site/randomroving/