Oct. 8 (Bloomberg) -- U.S. stocks are only ``halfway through'' a decline that sent the Standard & Poor's Index down 36 percent in the past year, said Jeffrey de Graaf, a top-ranked market analyst.

``The big concern is that we're going into recession,'' said de Graaf, a senior managing director at ISI Group Inc. in New York. ``The first part is the unwind of the previous boom, the second is the recession that follows. We're in the camp that we're only halfway through this.''

While many of the conditions that have accompanied market lows over the past four years are present, there is no sign of a rally, a situation de Graaf likened to a full tank of gasoline with no spark to ignite it.

``What you need at this point is something from the market to signify that it wants to go up, and it's not doing that,'' he said. ``There's a lot of potential fuel in that tank, we just don't have any momentum,'' in the form of most stocks rising.

Past indicators of market bottoms that are present now include a growing number of stocks at 52-week lows, a declining number trading above 200-day moving averages, elevated trading volume, falling stocks outnumbering rising ones, and negative investor sentiment.

Many of the same conditions were present two weeks ago, when the S&P 500 was about 20 percent higher, de Graaf said. De Graaf, 40, is chief technical analyst at ISI Group, the New York-based research firm, and has been the top-ranked technical analyst in Institutional Investor's poll the past four years. Technical analysts make predictions based on price and trading patterns.

Stocks Drop

U.S. stocks rose for the first time in six days today following a coordinated cut in interest rates by six central banks including the U.S. Federal Reserve.

The S&P 500 added 2.2 percent to 1,018.25 at 2:27 p.m. in New York, paring its drop from a record on Oct. 9, 2007, to 35 percent. As of yesterday, the main benchmark for U.S. stocks was down 32 percent this year, on pace for its biggest annual drop since 1937.

Beyond saying the plunge is half over, de Graaf wouldn't specify the level to which he expects the index to fall.

``Classic bear markets are 40 to 50 percent declines,'' he said. ``Generational leverage unwinds are much deeper.''

Stocks are poised for a rebound even if the primary trend remains bearish, said John Roque, a managing director in technical analysis at Natixis Bleichroeder Inc., a New York-based investment bank.

Oversold Stocks

``We are getting pretty close to the worst oversold reading I've ever seen for the last 80 years,'' said Roque, who ranked third in Institutional Investor's 2007 poll. ``We are getting close to a low we can rally from.''

Technical analysts describe a market as ``oversold'' when measures of market momentum reach low extremes.

The seven times since 1928 when the market was more oversold than yesterday all were followed by rallies, Roque said. A market ``low'' isn't the same as a market ``bottom'' marking the start of a bull market, he said.

``A low is often retested and many times broken to make a new low,'' Roque said. ``A bottom is secure, reinforced, stable.''

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Last Updated: October 8, 2008 14:33 EDT