Everyone is desperately looking for the bull...which is maybe why the VIX's* slight decline into sub-40 territory is being followed carefully for signs that it might be a signal of better days ahead on the equity markets. The decline below 40 is being considered a sign that investors might be turning less risk averse. It is evidently not enough to get excited over. Still, the VIX has fluctuated in a narrower band since the end of January when it moved to below 40 for the second time this year (first time was in early January and then it kicked up quite sharply again). So, keep tracking this "fear" gauge, but don't get carried away.

*The VIX is a measure of market volatility expectations.

A very interesting article from Warren Meyer aka Coyote Blog.

The money quote: "But in a large sense, at least so far, all the stock market has done in the last 2 weeks is return to historical norms. This tells me that there is nothing about the current level of the stock market that is screaming disaster signals. In fact, the current level of the stock market is screaming normalcy. "

The Chart he shows is impressive nonetheless:

Here are the links:

http://www.coyoteblog.com/coyote_blog/2008/10/good-news-reall.html

www.bloomberg.com  read more »

I found this graph on the following blog: http://www.clubforgrowth.org/2008/10/obama_vs_sp_500.php
After following a link from Instapundit.
Correlation is not causation, and there may well be more going on here than the picture shows.
BUT the point I want to make is the usefulness in getting a price information out of Prediction Markets.