John Hussman says technicals and fundamentals are battling it out in the market. And, while the former may take stocks higher in the short term, the latter will win out over the long haul, he says.

“We continue to observe a clear deterioration in leading indicators of economic activity,” Hussman writes in his latest market commentary on Hussman Funds’ web site. “Over the short-term, my impression is that the technicals may hold sway for a bit. … [But] the historical evidence suggests that fundamentals have ultimately trumped technicals when we’ve observed similar warnings from economic indicators in the past. … My impression is that the economic cold water could hit investors very abruptly, so that gains achieved over several weeks may be suddenly erased in a matter of a few days.”

Hussman’s advice to those looking to the market to fund major expenses over a short period of years: “Get out.” His advice to those who have a long-term, diversified, disciplined system, however: “Stick to your discipline.”

In general, Hussman says he is “bearish”. He also says that characterizations of stocks as “cheap” are off-base, and rely on metrics that haven’t had much historical success in predicting future stock returns. According to his “normalized earnings” metric — a better predictive measure, he says — stocks are priced to earn about 6.7% per-year returns over the next decade. He says that makes the market about 35% overvalued at this point.

Hussman provides several interesting charts on historical valuations trends, and he offers extensive commentary on the government’s bailouts and stimulus plans, and current financial position.