Can Stocks Predict Elections?

An interesting observation by Merriman, forwarded by Zoran:

Between October and May preceding a US Presidential election, there is usually a clearly identifiable low in the price of stocks. This is known as the "Pre-Presidential Election Year" trough. Usually it happens even before the end of March, and Merriman thinks the 10,007 low in the Dow Jones Industrial Average back on March 24 was it. After that low, stock prices tend to rally for several weeks. If, after that rally, but before the election, the DJIA then falls below the level of the "Pre-Presidential Election Year" trough, the party in office is usually voted out. Assuming the low of March holds through May, which means that if the DJIA falls below 10,007, the chances of Mr. Bush getting re-elected diminish considerably. The only president who bucked this correlation in the 20th century was Ronald Reagan in 1984, when the low in August of that year took out the "Pre-President Election Year" trough that formed in February, by about 30 DJIA points.