Last week, the Bear dragged the DJIA down to the #4 spot. That lasted for only a few days as this week we find the 2007/09 DJIA Bear in the #3 Spot.

We are currently only 1.38% from taking out the 1942 Bear's #2 position. But note that it took 236 weeks (March 1937- April 1942) for the current #2 DJIA Bear to drop -51.51%. The 2007/09 Bear did it in only 72 weeks! It took the 1929/32 Bear 59 weeks to pass the -50% line, (Wow!) and we know how that ended.

Can the DJIA fall 60% by June? It looks like a sure thing in Wk 72. But where we couldn't get a Dead-Cat Bounce between BEV-40% & -50%, I do expect a bounce before we reach BEV -60%. But more bad news in the banking sector could ruin that prospect.

It's too soon to be wondering if this Bear will replace the 1929/32 as the #1 all-time DJIA Bear. So stop thinking about that!

Below is my volatility chart comparing 2007's 40 & 200-day moving average closing price volatility with 1929 bear market volatility.

Note: 2007 values are actually positive. They were inverted so 1929 would fit on top and 2007 on the bottom. So for 2007, please forget the negative valuations and focus on the percentages.

The 200 day moving average keep climbing, it's way in front of the 1929/32 Bear. Historically, bear market volatility includes some great up days too as the Bear takes his paws off the Dow every now and then.

One item I never hear anyone else mention is that the 2007/09 Bear is the most volatile market in the history of the DJIA. Don't be surprised if we see a few 5% up days before this is all over. Bear Markets are a horror movie directed by the Bear. He'll give the Bulls lots of hope before the homicidal maniacs finish his movie with their chainsaws.

Historically, daily 1% swings from the pervious day's closing price in the DJIA, while not uncommon, should not occur on an almost daily basis. The stock market is running a fever with its "Persistent, Extreme Volatility."

Every trading day this week saw DJIA moves of greater than 1.00%. We have not seen that since Week 60 of my Bear Market Reports. Yes this market is running a fever with its Persistent, Extreme, Volatility.

As bear markets end in exhaustion, I expect to see volatility increase again before this bear market gives up the ghost and call it quits.

This is a very short-term Step Sum chart. It appears that the Step Sum has broken down considerably. It has not.

In my section below on Gold and Silver, I've included a DJIA Step Sum chart going back to 1995. When compared to past -40% DJIA Bear Markets, (see my article on Step Sums and Lundeen Bear Boxes) the serious selling that comes with the final Bear Market climax, has not yet even started. That while we are already at the BEV -50% line and the DJIA Dividend Yield still not even at 5%!

The Step Sum is an indicator of market sentiment. When the underlying sentiment is bullish the Step Sum will rise. When bearish it falls.

Think of the "Step Sum" as the sum total of all the up and down price "steps" in a data series over time. An Advance - Decline Line for a data series derived from the data series itself. Logically, bull market's will have more net up days while bear markets will have more net down days. Understanding the Step Sum is no harder than that.

Few investments have outperformed gold and silver since 2000. People familiar with the huge increases in US money supply are not surprised.

The inflation of the US money supply during the past 89 years has been massive. Washington's current "economic growth" programs promise to accelerate this trend in the next few years. Prudent people know that inflation on this scale will erode confidence in the US Dollar at a minimum. The total collapse of the dollar economy is also a possibility.

So it's time to devote a little attention to the old monetary metals of gold and silver. There are good reasons to believe the price of precious metals has some catching up to do with the US Dollar Production since 1920.

The chart below plots gold (Red) and silver (Blue) in US dollar terms.

Gold has exceeded its 1980's highs while silver is still far below its former highs.

Indexing gold and silver to their 02 January 1969 prices reveals additional information not obvious in their dollar price chart.

Above we can see how many dollars gold and silver have returned from a $1.00 investment on 02 Jan 1969 to the present. Gold has outperformed silver by a good amount for the past 40 years, except for the 1980 run up.

As this is a DJIA Bear Market Report, I'm including a 40 year chart with the DJIA and gold indexed to 02 Jan 1969.

Since 2001, gold has experienced an impressive bull market. However, financial media, so far, has mostly warned investors from it. But the financial media is coming around. It's becoming hard not to.

Including dividend considerations, Gold & Silver have outperformed the DJIA by a wide margin since 2000. But the current trend of the DJIA is down, while gold and silver's is up. This is a key concept to understand.

Since 1969, the DJIA's market trend has been countercyclical to gold and silver's. There are good reasons for believing the stock market will be in a protracted bear market for years to come. If 40 years of market history holds true, gold and silver will be in a sustained bull market for years to come.

The above charts are reason enough for caution in financial assets and motivation for purchasing gold and silver.

Probing still deeper into gold and silver, the BEV Charts below provide additional information not apparent with the usual price chart.

Gold and silver's fall after their 1980's peak were horrible. Twenty one years after gold's 1980's highs, gold bottomed at its BEV -70% line in 2001. It then reversed it price trend to close higher every year since 2000. Silver is currently sitting on its BEV -70% line. I expect silver to follow gold's lead by making new all-time highs in the next few years.

The BEV Chart allows us to see the bull market corrections from 1969 to 1980, during the last bull market for gold and silver. However, as BEV Charts are based upon "last all-time highs," this creates problems with gold and silver after 1980.

In 1980, a $2.50 move would move the plot about 5.00% when silver was near $50 an ounce. In 1999 when silver was around $5.00 an ounce, this same $2.50 would be a 50% move, but the BEV Chart using the 1980s high prices would not show that.

To prevent the BEV chart from referencing current silver price changes to its $50 levels 29 years ago, I've adjusted the chart below. This is accomplished by terminating the BEV plot series at the bottom of the market in 1982, and restating the plot series with single digit silver prices from 1982. I've done the same for gold. The 21 June 1982 break in the series is obvious.

Note that silver after 1982 still saw corrections of greater than 60%.

Gold and silver are volatile. During bull markets, gold and silver prices see corrections as deep as the DJIA sometimes experiences during a bear market before turning around to new bull market highs. BEV Charts are a powerful tool in analyzing decades of market data.

I'm trying to popularize the BEV (Bear's Eye View) Chart. In a 1995 issue of Richard Russell's Dow Theory Letters, Mr Russell published a chart, submitted by a subscriber, of the DJIA I found fascinating. After this one appearance in his publication, he never used it again. I took this technique as my own. Naming it The "Bear's Eye View" (BEV) Chart, I began to use it frequently on the data series I compiled from Barrons' Data Series that spanned decades.

To illustrate the fidelity of the BEV plot (between all time highs or BEV Zeros) to the original data, I've constructed the two charts below for your consideration.

From 1980 to 2007, both gold's price and BEV plots overlap each other. But if you look closely you will see that the blue plot is slightly above the red from 1980 to 2007. This is a scaling problem on my chart. The error is constant for all 1444 weekly data points.

The next chart takes our data to the present time. Note how the red plot has shifted downwards. This is a result of gold breaching the 1000 level, requiring my Gold price Y-Axis to increase from 831 to 1000. This is how inflation degrades past decades of data when viewed on a price chart. If gold should rise up to $10,000 an ounce, the 1980 highs will no longer be so apparent.

This is not a problem with BEV Charting. The BEV chart has a constant Y-Axis scaling of 0% to -100%. Each all-time new high is converted into a Zero% by the BEV formula shown below.

The BEV Chart is the only way I've found to compare past decades with each other during the decades of our inflationary era.

The Step Sums for gold and silver are seen in the chart below.

The Step Sums are derived from the daily (or weekly) changes in the price of the series itself. There is no reason a Step Sum could not be constructed from hourly data. The table below is a sample of the Step Sum for the DJIA from early in 1900.

The above Step Sum plots are only the sum of the up and down daily steps in price. The amazing thing about all bull and bear markets is that they both have about as many up as down days. But during bull markets, there are slightly more up days than down. Bear markets have slightly more down days than up. The Step Sum allows us to track the net Up-Down days and see the small, but significant bias in the bullish or bearish sentiment.

The gold chart below is derived from 10,080 trading days on the Comex. Yet for all of gold's volatility from 1969 to 2009, its Step Sum has only drifted between a range of -22 to 170 net Up-Down days.

When the Step Sum is acting in concert with the price, we know that the bull or bears have it right. But the Step Sum will also tell us when the bulls and the bears have it wrong.

Look at the chart above from 1977 to 1982. We see the Step Sum and gold rising up together until gold breaks down in Jan 1980. Note how the Step Sum went flat as gold fell to the BEV -40% line in Jan 1981. In the financial press from 1979 to 1982, there were no shortages of gold bulls calling for plus $1000 gold as the market fell under their feet.

I call this divergence a Lundeen Bear Box, as the Bulls and Bears had a disagreement on the direction of the price of a market, in this case, with the gold market. It's a Bear Box as the Bears won.

Look at the strength in the price of gold since its Step Sum reversed in 2001! But as I noted before, in both bull and bear markets, there are about as many up as down days. This net increase in gold's Step Sum is only a net of 150 Up-Down days from a total 1,926 Comex trading days since June 2001.

I've noted with my -40% DJIA Bear Market Step Sum studies that every major DJIA Bear Market ends with a final collapse in its Step Sum. That is precisely what we see in the gold market from 1995 to 2001. It took 21 years for the gold bulls to call it quits, but then gold was in a 21 year bear market. Returning to the DJIA, it's this DJIA historical market fact that causes me to believe that the DJIA has much more selling to come before we see a DJIA Bear bottom.

My short term DJIA Step Sum Chart is published each week with this report.

Silver's Step Sum is amazing! Silver has on many occasions been a disaster for its investors. But since 1972 the silver market on balance sees more up days than down days. Unlike the DJIA or Gold, the Silver's bulls haven't tolerated a significant Step Sum collapse since 1969. Price means nothing to these people.

Silver is down 40% in 1975-77, someone is buying. The silver market is down 90% in 1982, someone was buying the whole way down. The same was true for from 1982 to 2001. Silver goes from $5 to $20 from 2001 to 2008, someone is buying even faster! I'll say it again - Silver's Step Sum chart is amazing!

The silver market's bulls are either dumb as dirt, or the silver market is sitting on the edge of a volcano that will soon erupt.

I've followed Ted Butler and David Morgan for over 10 years. The basis of their work in silver is that most of 5000 years of silver production has been consumed in industry and cannot be recycled. It's gone for good! The US Government's Silver stockpile held over 5 billion ounces in 1945. Most of it is now resting peacefully in landfills. Think I'm wrong? Google "silver landfills" and find out.

I think Butler and Morgan are on to something. The implication of this would be that there is actually more gold than silver available to investors in the world. If that is the case, silver's price will one day reflect this fact.

I don't doubt them, and note that Silver's Step Sum supports the fact that the Silver Bulls don't give a damn about the price of silver. If there is an upcoming shortage as Mr Butler and Morgan predict, Silver's Step Sum strongly suggests that the silver bulls will continue to buy silver at any price no matter how high. Maybe even at a price higher than the future price of gold.

I like Silver better than Gold, but I'm not predicting any particular price, or if silver will be more expensive than gold sometime in the future. With that said, what is the historical relationship between the price of gold and silver?

Since 1969, the silver to gold ratio has swung from 15 ounces of silver for 1 ounce of gold in 1980 to over 100 ounces of silver to one ounce of gold in 1991. In February 2009, we again see that silver is more volatile than gold, not that the Silver Bulls care.

With all the uncertainty in the world, I think you should do what the Silver Bulls are doing. Forget the price of silver, just get your hands on some.

I would warn my readers about the gold and silver ETFs! They were created during a time of easy regulation and managed by the same banks that have created so many other investor rip-offs. James Turk has pointed to glaring red flags for the gold ETF all investors & fiduciaries need to be aware of before committing money to them.

Current "monetary policy" dictates that trillions of dollars will soon be created. It's not even news anymore. It will all end badly. If you don't have some gold and silver of your own in the months to come, You've no one to blame but yourself.

Dow Jones -40% Declines From 1885 to 2008 is the article that inspired this race of 1929 & 2007 Bear Markets. You may want to read that article to understand my "BEV Chart."

Dow Jones Industrials Average Market Volatility is the source for my volatility studies.

The Lundeen Bear Box and Step Sum is the source for my Lundeen Bear Box and Step Sum Chart

Note For the Record: Mark Lundeen does not want a devastating bear market in the next two years. However, in full view of Congressional Market Oversight Committees and under the supervision of Government Regulatory Agencies, things were done that I believe will make a historic bear market inevitable. If you have a problem with this bear market, contact Washington, not Mark Lundeen.