Former stock customers, leery of the market for so long, are moving cautiously back into the trading fray, brokers here said yesterday, and more are waiting on the fringes, ready to jump in if the Dow average breaks 1,000.

"People are looking at the financial page rather than the funnies," said Richard A. Austin, vice president and resident manager of the Merrill Lynch office in Bethesda.

"We are just now starting to catch it [the return of investors]. The true rally is starting," he said.

"We've been extremely busy this week," said Norman Schrott, vice president and manager of A.G. Edwards & Sons in Alexandria. "A lot of clients are coming back into the market. It takes a while sometimes for the public to realize what's happening.

"What's very bright is that we're also seeing a lot of new people," Schrott said.

Some buyers got in on Tuesday, in anticipation of a big day yesterday, said Pat Ryan from the trading floor at Johnston, Lemon Inc. And yesterday, the Dow Jones Industrial Average crashed through 1,000 to 1,009.39 at midday, and then fell back to 991.04 in another avalanche of shares traded.

"There's a lot of public interest in that [WORDS ILLEGIBLE] 1,000 mark of the Dow," Austin said. "We don't feel that the 1,000 mark, per se, has any particular importance.

"What we are looking for probably is the marketing positioning itself for a big sell-off, although we don't expect it to be large by any measurement.

"After that, we're then looking for the third phase of the bull market that we currently find ourselves in," meaning another climb by the Dow.

Some of Austin's fellow brokers around town agree.

"It's a classic battle of the bulls and the bears," Ryan said. "It's so psychological it doesn't really seem to be that important." Ryan expects some action today, two or three pushes at 1,000, then a weakening of the market before the next surge.

Although the Dow has been flirting with 1,000, it hasn't held the mark yet, Ryan reminded. He said there are two points of view on the 1,000 mark:

One side believes that if it holds the 1,000 level a day or two, the Dow could rise as much as 100 points in the next week or so.

The other camp thinks some major institutions that have been building up large holdings the past few months will take this opportunity to sell, converting their positions to cash and causing the market to slip, Ryan said.

Brokers here agree that oil and gas and petroleum service issues are benefitting from the run up in prices. Defense and high-technology shares also are getting a rush in the Reagan-inspired market euphoria from investors who expect those issues to do well under the Reagan regime.

Tom Donaldson, vice chairman of Julia M. Walsh & Sons, said, "As a result of the election, a substantial amount of European buying is coming into our equities markets. Oil shares are strong, anticipating a rise after OPEC meets."

But Donaldson sees the market as being overbought for a while and "it's just getting more overbought." He pointed out that the stock market historically dips in the first year of a new administration.

Schrott's buyers are heavy into oil and gas and high technology stocks. But "people are starting to look for more quality stocks, for value. People want their money managed intelligently."

"It's a pleasure to talk to them [clients], especially if they're in oil and gas and high technology," said Jean R. Roche, vice president of Ferris & Co. Inc. He, too, sees a return to equities buying in the current rally.

All the brokers yesterday tempered the generally optimistic feeling with caution.

"People tend to forget about the problems," said Les Silverstone, vice president and general manager of Dean, Witter Reynolds' office at 1776 K St. NW. "The euphoria gets them on the bandwagon. They like to jump on, ride it for a while, then jump off.

"The market won't go up another hundred points.

"The smart money is selling on this rally, rather than buying," Silverstone said. "This is a time to be taking some profits rather than buying into the market."

And what are the investors thinking of this dream-like rally?

Donald Diorio, one of a dozen people at the rail at Dean, Witter watching the quote board intently yesterday, said "If I knew what the hell this thing would do, I wouldn't be standing here. I'd be retired.

"What we need is a steady market, two or three points a day with volume. People are just getting in and making fast bucks and getting out," Diorio said.