NEW YORK (CNN/Money) - Lately it seems like Wall Street has more bouts with amnesia than soap opera characters do.

Coming off big gains from the day before, stocks looked to rally even more Thursday. After weeks (OK, several days) of being "50 miles" from Baghdad, coalition forces are tightening the noose on the Iraqi capital. Wednesday it was 35 miles, then 25, then within 20. Thursday morning it was 10 kilometers (which news outlets helpfully translated as 6.2 miles), then a few miles.

All of which raises the prospect, in the market's mind, that the war could be over by, say, supper time. And so once again traders the world over are selling government bonds, oil (near a 10-month low) and gold (which has slipped to a four-month low) and bidding up stocks and the dollar. When peace breaks out, you want to be on board, baby.

Now, the war really could be over by supper -- maybe it's a long shot, but it's still a possibility, and the world's fervent hopes and prayers for an end to this conflict surely count for something.

But the war could also have been over a week ago, Iraq's military throwing down their guns, its generals turning against Saddam Hussein. In the lead-up to and first days of the war traders bought on that possibility with wild abandon. They ended up being wildly disappointed when the war didn't go as smoothly as they expected. The market dropped and much money was lost.

Now you would think given their recent experience the rational thing for traders to do would be to hang back at this moment, see how things pan out. The Pentagon has repeatedly said that taking Baghdad -- a city with a population of between 4 and 5 million people -- will be anything but a cake walk. Media reports suggest that coalition forces may pause again before entering Baghdad. The threat that Iraq's leadership will use chemical weapons is intensifying with each step toward the capital.

Then there's the economy. Stocks keep moving higher in the face of lousy reports -- Tuesday's horrid read on manufacturing by the Institute for Supply Management, Wednesday's big drop in February factory orders. Thursday it was an unexpectedly big jump in weekly jobless claims -- a sign that the key economic report of the week, the March jobs report on Friday, could come in poorly.

But traders aren't doing the rational thing. They're doing the speculative thing -- betting that the war will go swimmingly from here on out, and that once that happens the economy will perk right back up.

"The pendulum of market sentiment has swung too far again," said Marc Chandler, chief currency analyst at HSBC. "It's not doing anyone any favors."

Of course the buyers may be right -- again, it could happen -- but if they are we should praise their luck, not their intelligence. Yes, there is always an element of gambling in the market, but one likes to think there's also a measure of analysis and intelligence in one's moves. Like in a good poker game.

But buying stocks now -- or shorting them, for that matter -- is more like betting on the flips of a coin.