"It's now clear that the stock market crash of October 1987 was a one-step correction of overvaluation, not the start of a long, steep decline," says Standard & Poor's Outlook, one of the most influential of all market newsletters.

"Nevertheless, the confidence and incentive to move the market upward in a determined way will, in our view, remain elusive."In its annual forecast, The Outlook pinpoints several reasons for this elusiveness: the difficulty of keeping foreign money flowing into the United States, the hemorrhaging of the savings and loans, and the modest shrinkage they expect to see in the deficits.

"The combination of unsettled background conditions and enticing yields on alternative investments will be difficult for stocks to surmount. At best, the coming year will see a continuation of the recent pattern of short-lived rallies and declines, with the market finishing 1989 5 percent-10 percent below recent levels."

Still, The Outlook sees enough individual opportunities to suggest committing 55 percent of funds to common stocks.

The seven stock groups The Outlook expects to have the best performance in 1989 are: pollution control, drugs, auto parts, regional banks, computer software, heavy trucks and telephone companies.

Its favorites for appreciation, "Ten Stocks for Action in 1989," are an equally diverse lot: AT&T, Armstrong World Industries, First Wachovia, Fleming Cos., Franklin Resources, Harland (John H.), Motorola, PACCAR, Warner-Lambert, Zurn Industries.

But it is The Outlook's list of "Attractive Special Situations and Speculations" for aggressive investors that seems most interesting. It contains seven stocks of immense, though far from guaranteed, potential.

AMERICAN INTERNATIONAL GROUP, the largest commercial insurer in the United States, also has broad geographic diversification in 130 countries, a fact The Outlook feels should give it a big boost when Europe consolidates in 1992.

APPLE COMPUTER, "despite exceptionally strong results in recent quarters, has been under selling pressure as investors continue to shun technology stocks." The Outlook expects the personal computer market, and Apple, to keep thriving.

BANCTEC, a provider of computerized document processing systems, sells for less than 10 times earnings despite rebounding sales and profits, a strong balance sheet and low debt.

HASBRO, the leading toy company, should benefit from the dying video game fad and "the return to the simpler toys it excels at." The stock is down 40 percent from 1987's highs, and The Outlook considers the company a takeover possibility.

J.P. INDUSTRIES has a record of buying inefficient operations in the engine component and plumbing hardware businesses and turning them around. The stock sells at only seven times projected 1989 earnings.

MINISCRIBE has recorded an impressive string of sharply rising quarterly sales and earnings for the past three years in the disk drive industry, yet sells for less than five times earnings.

SUMMAGRAPHICS, "trading at only seven times estimated 1989 earnings and 1.8 times book value is undervalued," says The Outlook, "based on the company's dominance of the fast-growing market for translating graphic information into digital form."

(The Outlook, 25 Broadway, New York, N.Y. 10004; weekly, $240 annually.)