The Market's Top Is as Slippery as the Bottom

Each day, it seems, the market has a new theme and focus, often running counter to the prior day's trend. Such developments make life difficult for day-traders, but have not deterred myriad market watchers from attempting to pinpoint the market's peak.

This cottage industry of top-calling mirrors the "bottom-pickers" of 2000 and 2001, and is occurring despite the inability of sellers to gain much traction.

After Wednesday's big advance, for example, early declines all but evaporated Thursday afternoon as an earlier-than-expected upside surprise from Dell (DELL) offset disappointing results from Wal-Mart (WMT) and some lackluster economic data.

"The market has no memory from day to day and it is not likely a good strategy to extrapolate one day's gains into the next day," observed StreetInsight.com contributor Doug Kass.

In the microcosm, retailers were one of the prime beneficiaries of traders' desire for economically sensitive names earlier in the week (Merrill upgraded several names Wednesday), only to be pummeled Thursday after Wal-Mart's penny shortfall and lackluster guidance, as well as concerns about guidance from Target (TGT).

While major averages fell marginally, the S&P Retail Index shed 1.2% Thursday.

Taking the Dog(ma) for a Walk

Among the bearish contingent, a vocal minority, the postbubble Nikkei analogy continues to hold tremendous allure. In a nutshell, the theory is that financial markets (and investors) act in similar patterns in postbubble environments.

Since its March 2000 peak, the Nasdaq Composite has followed a very similar pattern to Japan's Nikkei, which hit its peak on Dec. 31, 1989. Both averages hit significant lows about 2 1/2 years after their peaks and have behaved in a similar manner since then. As noted here, there have been some recent divergences in the pattern but many of those watching the analogy believe it still points to a mid-November peak for U.S. averages.