During the credit crisis, the Dow has seen an astonishing number of days when it has finished up or down several hundred points, once swinging 1,000 points in a single day.

That doesn't bode well for a stable investing environment.

The recession may be worse than feared . See video at left.

"We can't have these monstrous swings up or down on a daily basis," says Richard Sparks, senior analyst at Schaeffer's Investment Research in Cincinnati. "That doesn't create any foundation for future buying and doesn't create a situation where people would want to put their money at risk."

But on the positive side, Sparks points out that the VIX on Monday closed below its 10-day moving average, which it hasn't done in a month.

"When that's happened, when it's traded a number of days above the 10-day moving average then moved below that, it's a pretty positive sign for the market," he says.

But even a low VIX doesn't necessarily mean a turnaround. The barometer stayed low for much of the market's run downward, spiking only recently during the latest wave of bad banking news and subsequent government bailout plans.

For investors

"When the VIX gets down to about 40, which was the previous high, then that means that everyone's become complacent again," says Peter Miralles, president of Atlanta Wealth Consultants. "The question is, are they complacent for good reasons? The pendulum has swung and we're seeing high volatility. Unfortunately the volatility all came at one time toward the downside."

Credit

When the stock market began falling off its October 2007 highs, it was a precipitous drop in the banking sector that brought the major averages down.

A few months later, oil prices began to soar as a hedge against falling stocks. Soon, the two began marching in reverse lockstep--when oil prices rose, stocks fell, and vice versa.

Now it is lending rates, particularly the London Interbank Offer Rate, or Libor, that seems to have Wall Street's ear. If Libor is up, stocks are generally down, though that wasn't the case Tuesday.

Analysts say getting banks to loosen their purse strings and put money back out on the street again is pivotal towards stabilizing the stock market and the economy.

"Any kind of loosening up of the noose on the credit markets would free up individuals to do some spending, it would free up corporations to do some spending," says Rick Pendergraft, head of the Investor's Daily Edge newsletter. "If we can see a little better increase in spending both at the consumer level and the corporate level, then I think we could get a better idea of where this economy is heading for the next six months."

Miralles says the credit freeze has begun to thaw, but it's still unclear as to how long it will take stocks to benefit and how much credit concerns will continue to weigh on the economy.

"Is the second shoe going to drop as far as the economy goes?" Yes, but is it already factored into the market? That's the big question," he says. "We don't know that."