The 59-year-old Irishman met Black Cats chairman Ellis Short for a second time in an attempt to thrash out a deal after positive talks on Thursday night, albeit talks which broke up without an agreement in place.
It is understood slow progress is being made as the fine details are discussed and that negotiations could continue into the weekend.
However, if the former Northern Ireland international does finally put pen to paper, he will do so with the blessing of Manchester United boss Ferguson.
Asked about O’Neill’s candidacy yesterday, the Scot said: “Martin has a very good track record.
“The job he did at Villa Park was excellent, he did a great job at Celtic, he won the League Cup with Leicester, so Martin has got the experience and track record to do well.
“If that’s the job he’s going to, I’m sure he will do well.”
O’Neill has been out of the game since leaving Aston Villa on less than friendly terms in August last year but enjoys popular support in Sunderland.
His name has been on the lips of the majority of supporters whenever the post has become vacant, and they will hope the outstanding issues can be resolved swiftly to allow an appointment which would bring new hope to Wearside.
A dismal start to the season has yielded another derby defeat to Newcastle and just two victories in 13 Premier League games, the 11 points gathered leaving the Black Cats 16th in the table, two points clear of the relegation zone.
Tomorrow’s trip to Wolves and next weekend’s clash with lowly Blackburn at the Stadium of Light will be followed by a series of more testing fixtures against Tottenham and QPR away and Everton and Manchester City at home.
However, Ferguson also expressed his disappointment with the club’s decision to dispense with Steve Bruce’s services, and suggested unreasonable pressure had been applied by fans.
He said: “Fans just don’t have the patience any longer, just see what happened to Steve Bruce up in the north-east, where being a Geordie didn’t help him.
“In that part of the world they are so passionate and committed to their football team and what happens the other side of the Wear means a lot to them.
“I think Brucie has suffered because of that, but that’s the kind of supporters we have these days — no patience.’’
In the meantime, Bruce’s assistant Eric Black will take charge of team affairs.
“It is important that everyone is focused on the game and prepares in the right manner, so that’s what we will be concentrating on,’’ he said.
“Naturally it’s a difficult time for everyone at the club but we have to be professional and get on with the job in hand.”