What a Week: Market Keeps Poking Bottom-Seekers in the Eye

Pain and Disappointment. Agony and Frustration. Fear and Loathing.

Like uninvited dinner guests, those "couples" keep showing up at Wall Street's door. So it was again this week, which saw the Dow Jones Industrial Average fall 0.5%, the S&P 500 lose 1.9%, and the Nasdaq Composite decline a whopping 8.5%.

Perhaps the most perplexing aspect of the decline is the market's continued ability to confound those who have repeatedly said the end of the selling is nigh.

"To try and call the bottom in the last six weeks has been about as foolish as calling the top in the first quarter," said Scott Bleier, chief investment strategist at Prime Charter, who resisted any temptation to do so on Friday. "The market is back to its old ways of confusing most of the people most of the time."

Bleier, who readily admitted his prediction the markets would rally in September was wrong, harped on the theme of the current environment being a mirror image of the heady days of late 1999 and early 2000.

"The fear in the Nasdaq investor is approaching the level of greed in the first quarter," he said. "The Comp would have to go to zero to get the equivalent, but I don't think we need that. The fear is thick [after] six weeks of devastation."

Failed rallies followed by unrelenting selling acted like cornstarch in gravy, thickening that fear as the week progressed. The anxiety came to a boil on Friday as the Comp fell 3.2% while the S&P declined 1.9% and the Dow lost 1.2%.

No Shelter Here

Fittingly, the week got off on a downbeat Monday, particularly for tech stocks. Traditional leaders such as Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) slid to new 52-week lows while newer favorites such as Juniper (JNPR Quote - Cramer on JNPR - Stock Picks) and Siebel Systems (SEBL Quote - Cramer on SEBL - Stock Picks) showed the first signs of susceptibility to recent trends.

Meanwhile, the Dow posted a modest gain while the S&P 500 finished near break-even behind strength in financials, drugmakers, industrials and old tech stalwart IBM (IBM Quote - Cramer on IBM - Stock Picks).

The pattern of big-tech losses and modest blue-chip gains resumed Tuesday as the Comp fell 3.2% while the Dow rose 0.2%.

The Dow, however, closed well off its intraday highs after the Federal Reserve issued a statement declaring inflation risks remain most disconcerting. The Fed left monetary policy unchanged, a near foregone conclusion, but some investors had hoped the central bank would adopt a symmetric bias. The absence of such a change prompted heavy selling.

Among individual names, Oracle (ORCL Quote - Cramer on ORCL - Stock Picks) and IBM (IBM Quote - Cramer on IBM - Stock Picks) were lowlights Tuesday, hurt by rumors of pending earning shortfalls.

Meanwhile, former highfliers such as Commerce One (CMRC Quote - Cramer on CMRC - Stock Picks) and i2 Technologies (ITWO Quote - Cramer on ITWO - Stock Picks) suffered sharp losses, while once woe-begotten blue-chips such as 3M (MMM Quote - Cramer on MMM - Stock Picks) and Alcoa (AA Quote - Cramer on AA - Stock Picks) enjoyed solid gains.

"This is the kind of action that depresses people," Tony Cecin, managing director of Nasdaq trading at U.S. Bancorp Piper Jaffray acknowledged mid-week.

Cecin expressed hope the rising pessimism would facilitate an end to the downturn, but admitted to "not seeing any event that's going to turn the market around."

A turnaround did occur Wednesday amid talk many big-cap tech stocks had reached bargain levels. But hopes for a sustained rebound were dashed after the close when Dell (DELL Quote - Cramer on DELL - Stock Picks) joined the long list of tech bellwethers to warn of disappointing results.

The reaction Thursday to Dell's warning wasn't as horrendous as some feared. But a separate warning by Knight Trading Group (NITE Quote - Cramer on NITE - Stock Picks), the announcement of the closure of grocery and gasoline operations by priceline.com (PCLN Quote - Cramer on PCLN - Stock Picks), and a negative reaction to strong earnings from Micron (MU Quote - Cramer on MU - Stock Picks) reminded investors of the folly of placing too much emphasis on Wednesday's bounce.

Thursday's downturn proved a mere appetizer to the main course of selling to come on Friday. More profit warnings late Thursday plus a stronger-than-expected employment report early Friday paved the way for the big drop.

Markets were further roiled Friday by rumors of Wall Street firms suffering heavy losses in the junk bond market. Much of the rumor mongering focused on Morgan Stanley Dean Witter (MWD Quote - Cramer on MWD - Stock Picks), which lost 8.4%.

Meanwhile, heavy losses continued to mount among erstwhile tech favorites such as Veeco Instruments (VECO Quote - Cramer on VECO - Stock Picks) and Sycamore Networks (SCMR Quote - Cramer on SCMR - Stock Picks).

The declines Friday left some hoping the much-anticipated capitulation was at hand. Others wondered if the session wasn't a prelude to another "Black Monday," although that scenario is complicated by the concurrent Yom Kippur and Columbus Day holidays.

Ned Collins, executive vice president of U.S. stocks at Daiwa Securities America, offered another alternative.

The recent action "reminds me of the markets of the 1970s when it was just Chinese water torture," Collins said.

Having been on the Street since those days, the trader commented -- as have many others -- that what's happening now is merely the comeuppance for the excesses of recent years.

"You cannot have 25% returns on the stock market indefinitely," he said. "For 100 years, the average return has been 8%. We've averaged over 20% for the past three years. So that would mean you're going to have to give back something. This could be the start of it."

And we all know what paybacks are like, as the past week demonstrated once again.