Dispelling Recent Fed Funds "Myths"

I'm following chatter of media and friends about the imminent doom that may come from Fed Funds rates increases, and that the market perceives a higher chance that the Fed pull away from zero interest rate policy soon. First, 2 Fed Funds charts showing no evidence the market perceives a risk that the Fed changes its policy near term. In fact, quite the opposite, bets are being put on that support extension of zero interest rates. The past 2 weeks have most definitely seen increased expectations for lengthening of current policy.

March 2010 Fed Funds contract:



And January 2011 Fed Funds contract. Remember, the higher this goes, the lower the interest rates. 98.80 means expectation of a 1.2% effective fed funds. 95.00 would mean an expectation of 5% fed funds.



Now to the piece of "common sense" that says the market would fall when Fed stimulus reverses course. First, from a history of 1954 to present, with blue areas showing periods of rising interest rates. Followed by a 1970 to present snapshot (more relevant data set perhaps).



And 1970 to present:




To me, Fed hiking looks more like a bullish signal and Fed loosening is more unpredictable (for good reason, as it responds to contractionary periods). It almost seems like there is a conspiracy in the media to get people to sell this move up. Maybe that's a silly and paranoid presumption. Right?