Stocks have scaled technical heights recently, but Wall Street chartists watching these bullish developments expect a flat market at best in the wake of the strong rally from September lows.

"A best-case scenario would be some kind of a trading range going forward," said Louise Yamada, head of technical research at Salomon Smith Barney. "You've got a lot of work here to do and you've already seen a significant advance. I think the odds suggest we aren't going a lot higher any time soon."

The Wall Street rally from 3-year lows in the fall in the wake of the devastating Sept. 11 attacks on the United States carried the tech-laden Nasdaq Composite up nearly 45 percent. The blue chip Dow Jones Industrial average and the broad Standard & Poor's 500 , gained more than 22 percent and 19 percent, respectively.

Yamada echoed remarks from other technical analysts, who focus on price action, volume and sentiment indicators to divine where stocks are likely to head next.

"The majority of the V-type recovery for the stock market is now probably over," said Eugene Peroni, technical analyst at Nuveen Investments. "We are now going to go into a bit of consolidation and a lateral channel in the short run."

200-Day Moving Average

One chart formation that caught attention is the 200-day average -- a gauge plotting an index's trend over the intermediate to long term. It is calculated by adding up the closing price of component stocks over the last 200 trading sessions and dividing the outcome by 200.

The Nasdaq has continued to move above the technically significant level since crossing it on Dec. 4 for the first time since September 2000. The rally pushed the Dow and S&P briefly above their respective 200-day moving averages, but the indexes late this week pulled back yet still straddle those levels. S&P crossed it on Jan. 4 while Dow jumped above it Dec. 6 for the first time since October 2000 and August 2001, respectively.

For the rally to get legs from here, the analysts say, the Dow and S&P would have to convincingly clear these 200-day averages -- no easy feat given the massive overhead "resistance." Resistance is a price level where sellers have emerged in bulk in the past, sending the gauges and component stocks lower.

For Nasdaq, initial resistance is 2,050 to 2,100 points but a much bigger obstacle remains at 2,300, or 250 points above its level on Friday. The Dow has to prove it can go significantly above its 200-day, which is at about 10,100 points now.

"If it can't essentially start to break over that, then I think that would remain somewhat of a resistance level," Peroni said. "Then deterioration under the 10,000 level could bring about more consolidation."

What's more, the fact that the moving averages have been in a long decline is still seen by some as a sign that the bear market that began in early 2000, when the Nasdaq, for example, peaked at more than 5,000 points, is not over yet.

"I don't think we should be looking for a runaway market here," Yamada said. "The important technical thing to understand is that the bigger the top, the bigger the drop; and the bigger the drop, the longer the need for repair."

The S&P, a broad market gauge, has initial resistance at about 1,180, a few points from its recent levels. Resistance is very strong at around 1,233 points, though, or about the current level of the index's 200-week moving average

40-Month Averages, Support Levels 

Analysts look at such longer term moving averages to filter out daily or weekly market "noise." These measures, they argue, signify that the latest rally is a bull advance within a broad declining market: the bears are not in hibernation yet.

Bernie Schaeffer, chairman of Schaeffer Instement Research, tracks the stock market indexes' 40-month averages, and these, he says, are still flagging bearish long-term readings.

"Even though (the Dow) had that sharp recovery since the September lows, it has not been able as of yet to overtake its 40-month," Schaeffer said. The long-term average comes in at 10,300, 200 points above Friday's level.

Nasdaq has ways to go with its own 40-month coming in at about 2,750 points -- a hefty 700 points above Friday levels.

One particularly bearish formation long-term, Schaeffer argues, is that the S&P has now closed below its 40-month average for 11 consecutive months, (going on 12, barring a rally of more than 10 percent in January). This contrasts sharply with previous market declines when the S&P managed to hold above its 40-month average, in 1994, 1990-91 and even 1987.

"I don't think we are out of it (bear market). My feeling is we could have a bit further to go (up)... but the next major move is going to be to the downside," Schaeffer said, adding the indexes would test, if not undercut, the September lows.

Some chart readers dismiss moving averages as lagging indicators and focus instead on outright support levels -- chart regions where buyers usually entered the market en masse after a sell-off deeming stocks are cheap enough.

Support levels set in mid-December must hold on pullbacks for the long-term rising trend to remain intact, said Jonathan Dodd, analyst at Morgan Stanley. He puts the levels at 9,700, 1,900 and 1,120 for the Dow, Nasdaq and S&P, respectively. The three gauges were at 10,080, 2,050 and 1,157 points Friday.

"As long as the trend of higher highs and higher lows continues, that's the uptrend," Dodd said. "But what is important is the support levels for all the averages. If that doesn't hold, then that medium-term trend probably turns down."