Retail investors have been a lucky bunch in the last eight months, riding out a bad Christmas and a difficult October on their way to outperforming the market. The

S&P Retail Index

gained 2.7% since the last day of August, while the

S&P 500

fell 26.4% and entered a bear market.

But now, as the bulls and bears war over yet another market bottom, now might be the time to either buy retail into the weakness or sell and take profits. In any event,

Merrill Lynch

analyst Daniel Barry said that retail stocks are due for a dip in the upcoming month. He advised investors who missed the last rally to buy some of these stocks as they weaken and buckle up for round two.

"Retailing stocks have posted exceptional price performance since last summer. They deserve a rest, and we think they'll take one," he asserted.

Indeed they did. The

S&P Retail Index

slid 0.6% today, led by selling in

Home Depot

(HD) - Get Report

and

Wal-Mart

(WMT) - Get Report

.

So, look for stocks to fall. Barry cited four major reasons for the upcoming downturn in retail stocks. One is obvious. People are simply going to take some money off the table now that it seems like a bottom is being built. The other three reasons, however, are closely linked to April, its showers and hopes that May could yield flowers.

"Seasonally, April is the weakest month of the year for the relative performance of retailing stocks," Barry said. When retailers have a strong February and March, as they did this year as a safety haven for tech-weary investors, they tend to slip in April.

Additionally, the weather and calendar aren't cooperative this year. Barry says that late-March and early-April storms could keep people away from the mall, as they did in the early part of March and prior to Christmas. One major problem with the bad weather, aside from soggy socks, is that consumers could confuse weather-related sales slumps with the economic downturn, exacerbating the problem.

Easter is also a week earlier than last year, which could affect the sales data from many companies. And although this phenomenon is well known by the retail crowd, stocks tend to feel the pressure nonetheless.

"We stress that any relative price weakness should be only a temporary interruption to the strong relative bull market under way. Today is probably not an ideal time to buy retailing stocks but a good entry point should not be too far off," he wrote.

So, why should the retailers continue to rally after they've had the hot hand for the past eight months?

Barry said that, according to forecasts, retailers are expected to continue to outperform the S&P 500. Lower interest rates and the tax cuts promised by the Bush administration are also good news for retail stocks, which benefit when money isn't that much of a problem for corporations and consumers.

Don't fret about today's losses. Barry says there's still room to get in here.

"Investors who missed the first leg of the bull market will have a chance to catch the second."