Lots of action happening in the stock market this week, and plenty of opportunities for investors willing to go against the popular trend:

-- On average, U.S. bank stocks are down about 60% this year. The SEC came out yesterday and said it wants to stop naked short selling in an effort to curb "fear" manipulation of stocks like the brokerage houses Fannie Mae and Freddie Mac. There are some very good quality banks out there that have seen their stock prices fall with the general banking sector.

-- Oil prices fell more than $6.00 yesterday. While the popular media was quick to blame the slowing U.S. economy, the reality is that, after such a run-up, profit taking was due. Could the top be in for oil prices? While the majority of analysts are telling their clients that oil prices will go higher, the price chart of crude today looks like a top is in place. It may be temporary, but a top is in.

-- The automakers are cutting jobs and the production of gas guzzlers. The deals on cars are getting better and better. And so are the losses piling up at Ford Motor Company (NYSE/F) and General Electric Company (NYSE/GE). Of course, the big focus now, and what is on the minds of consumers, is energy-efficient vehicles.

-- Gold bullion is inching closer and closer to the magic $1,000 per ounce level, but gold stocks are falling in price. It's almost as if the gold stocks don't believe the rally in gold bullion is for real.

-- The carnage in the U.S. housing market continues. With the bank stocks down so much in price, lending practices are being tightened. It is getting more difficult for even qualified buyers to get financing. After a rally in the beginning of this year, the Dow Jones U.S. Construction Index is melting away.

What does this all mean for investors? Here are the two most important points from my view:

Firstly, while everyone, including the Fed, is talking about inflation rising, I'm concerned about deflation. Stock prices are falling, car prices are coming down, house prices are falling and now even crude oil prices may have topped out. I wouldn't be surprised if all this "fear" in the stock market is about deflation. I have been writing about my concern about deflation since 2005 when the housing market topped out.

Secondly, the stock market is becoming severely oversold. In particular, some quality bank stocks have been overly punished by investors and traders. Yes, I'm a big believer in following the trend, but no trend goes in a straight line. I believe that the market is due for a good rally from its currently oversold condition.