With its mix of sacred Indian artifacts and roadside souvenirs, "Lost and Found Traditions: Native American Art 1965-1985," now at the Renwick Gallery, is the strangest exhibition. Is it sad or reassuring, spiritually triumphant or poignantly pathetic? I have visited it twice and still can't quite decide.

Old Indian art is easy. No one with a heart can fail to respond to a rain-smoothed Haida totem pole wreathed with fog, a thousand-year-old banner stone or an eagle-feather headdress worn proudly in the bygone days when war parties and buffalo roamed this wild land. Faded, mournful ghosts dance around such relics. But there is no old art here.

These 380 objects -- with their mass-produced glass beads and sharp electric colors -- are gnawed by a bright newness. They do not make one think of the silence of the forest, of dyes made of roots, of wood smoke, of the hunt. They make one think of shops.

How is one to read a pair of buckskin moccasins made in front of a TV set? Are these little beaded cases for throwaway Bic lighters really talismans of Indianness? Are these rear-view-mirror ornaments, that decorated baseball cap, or these sneakers bright with beads?

We cannot help but smile at the businessman from Dallas who wears $600 cowboy boots but never rides a horse. A sense of Who're You Kidding? humiliates the tourist masks sold at airports in West Africa and the 20th-century gas lamps attached to Georgetown houses. There is something deeply silly about newly made antiques.

It may not be the fault of the Indians of America -- or of these carefully made necklaces, bean pots, belts and baskets -- but memories of gift-shop shelves and marketed nostalgia nibble at this show.

And yet it's strangely moving. For every now and then one gets a stabbing sense of ghostly gods revivified, of heartfelt authenticity and rediscovered pride.

Everyone who sees the Sioux peyote set -- that wand and fan and rattle made in 1983 by the Rev. Burnett Iron Shell -- will apprehend its holiness. Many of these objects, say, that unpretentious digging stick made of an antler and a wood lawn mower handle by Montana's Agnes Vanderberg, sing a sort of timelessness and an Indianness so powerful that one forgets one's doubts.

The scholar Ralph T. Coe, who arranged this exhibition and wrote its splendid catalogue, did so as an act of love. Coe is an art historian. He was trained at Oberlin and Yale, at the Victoria and Albert, London, and at the National Gallery of Art. He's spent nearly a decade working on this show and seeking out its artists. At first he used his own funds. Then, moved by his devotion, the American Can Co. provided more than $300,000 so he could purchase the objects here displayed.

It was while searching through the Indian past that he began to see the present. In the early 1970s, Coe began to organize a show called "Sacred Circles," a grand historical exhibit first displayed in London in 1976. It was while working on that show that he came to see he would have to do another. All its artifacts were old. They conveyed a mournful message: Great traditions have been massacred, true Indianness has vanished, the old ways have been lost. But Coe began to understand that was not the case.

"All too often," he writes, "contemporary Indian arts and crafts have been dismissed as pale reflections of once great art forms now gone forever, like a drum gone silent. An extreme view proposes that today's reservation arts are barely worthwhile at all, that they are not worth exhibiting, that they lost their quality before World War I and have been deteriorating ever since."

"Lost and Found Traditions" battles that contention. It hurls a challenge at the viewer. Stop mourning what's been lost, it says. Look what's still alive.

The rare, time-hallowed works of art seen in "Sacred Circles" -- those wampum belts provided by the Chartres Cathedral treasury, that ancient Cherokee basket, the oldest of its type, from the British Museum -- came from great collections. That is not true of what's here.

Those Chitimacha cane reed baskets were bought, in 1983, from a Holiday Inn gift shop. That 15-foot-long birchbark Algonquin canoe was purchased in 1981 from the craft cooperative at the Golden Lake Reserve. Those cane Koasati baskets were discovered in a decorator's shop on Armitage Avenue in Chicago in 1976. The collector learned to wait. One dance outfit on view, which he ordered from its maker, Ojibwa Jessie Clark, in 1979, finally arrived in 1985.

Think how long it took to weave these subtle baskets, and thread these million beads. An eerie sort of patience, a sense of time disrupted, of past and present blended, is felt throughout this show. What makes it so touching is its meditative slowness. Coe calls it "Indian time."

Indians are great traders. Their traditions are not static. They've been responding to the new, to new materials and new markets, for many hundreds of years.

Indian beadwork, for example, flourished in response to glass beads brought here from Europe in the 18th century. Old Plains Indian beadwork is now cherished by collectors, "but before the 1760s," says Coe, "such work did not exist."

Among the most impressive objects in his show is an Ojibwa "bandolier bag" made in 1980-1982 by Maude Kegg of Mille Lacs Indian Reservation in Minnesota. Coe believes it "an Ojibwa masterpiece, as fine as any bandolier bag worn for prestige by an Ojibwa dignitary in the past. In design it follows the white-field flowered type popular in the 1890s and early 1900s, but it is more colorful than bags of the past ... In the past, during the fluorescence of Ojibwa beaded clothing after 1870, as many as six or more of these bags ... would be worn for special occasions." But even then their forms were not entirely "traditional." The design of the Ojibwa bag was imitated freely from the military shot pouches that white soldiers wore.

If "authentic" Indian beadwork can be added to a white man's shot pouch, why should one object to the beading that here ornaments a lighter case, a watch band, a pair of sneakers or a baseball cap? Are these things less Indian just because they're new?

The Renwick's installation, designed by Allan Kaneshiro, stresses regional traditions. The art of Santa Fe is not that of Quebec. Yet something held in common, a love for certain colors, such as sky blue against bright red, for fringes and tight craftsmanship -- a sort of pan-Indian esthetic -- is felt throughout the show.

A modern Nitnat mask here, of red cedar and smoked buckskin, is based on a photograph that its maker, Art Thompson, discovered in a catalogue from an ethnographical museum in Hamburg. The artists represented borrow from antiquity, and from the world at large. They also borrow from each other.

Silversmiths who work today, for example, in Kansas City, may well have learned their craft on trips to Arizona. "We all went down to the Southwest at one time or another," says one of them, Choctaw silversmith Bob Blue.

Coe writes: "One of the factors that will confuse future scholars who study contemporary Southwestern jewelry is the migration of styles: Navajo silversmiths now make bracelets in Hopi overlay style, even in Pueblo styles, and use various Zuni techniques." Cross-cultural exchanges -- brought about in part by the jet plane and the market and cross-cultural events -- are sensed throughout the show.

An Ojibwa beaded purse here bears the image of a rose -- "a motif," writes Coe, "that has in time traveled from Canadian Ojibwa lands in Western Ontario to the Canadian Cree, to the Rocky Bay Chippewa/Cree of Montana, and even to the Wind River Shoshone of Wyoming." There are wooden roses on display made of poplar splints. "Poplar splint roses were invented in 1937 by Madeline Knockwood ... In exceeding the limitations of the craft she did more than she perhaps intended; today the flowers crop up in Maritime Indian homes, displayed in vases on shelves or mantels as symbols of Indianness."

There are various sorts of Indian art. Some of it -- the big paintings of Friz Scholder, for instance -- belongs to white-walled galleries, to what one might call the mainstream of contemporary art. Some is reverently historical. There are Indians in New Mexico who now market silk-screen prints based on the designs of antique tribal rugs. And much of what is sold today -- say those turquoise earrings mass-produced in workshops in Hong Kong or Taiwan -- is not art at all.

The objects Coe has collected -- whether made for tourists, or for the artist's private use, or for other Indians -- are free of that rank phoniness. Many are exquisite -- look, for instance, at those cedar house-post models carved by Robert Davidson, that Haida cap and frontlet made by Fred Davis or that silver and turquoise necklace by Navajo Russell Rockbridge. All are made with care.

If the Smithsonian Institution ever manages to build a National Museum of the American Indian on the greensward of the Mall, Ralph Coe is just the sort of scholar who ought to be considered for the position of director. He sees the Indian present as clearly as the past. He honors Indian artists. And he has somehow learned to rend that veil of nostalgia that blinds most of his colleagues, and the rest of us as well.

His show is problematic. It feels at times commercial and a bit anachronistic. It is vulnerable in many ways. And yet it is alive.

"Lost and Found Traditions: Native American Art 1965-1985" is being circulated by the American Federation of Arts. It will remain at the Renwick Gallery, 17th Street and Pennsylvania Avenue NW, through March 6