Obviously we did not see a stock market crash in the seasonally bleak September/October timeframe, but in almost stealth fashion, several key component stocks within the Dow Industrials did see severe declines. Following is a table of the declines experienced by each of the thirty Dow Industrials Components so far during the autumn decline of 2005. We tracked from three different starting points through the recent closing low for the Dow Index on October 21st, 2005. We compared the closing price on the date indicated with the October low to find out which stocks fell hard, which fell mildly, and which held up pretty well.

The three starting points selected to measure declines were the two closing tops, both of which were phi mate turn dates, July 28th, 2005 and September 12th 2005. The third starting date chosen was the first Hindenburg Omen date, September 21st, 2005.

Here's what strikes as quite interesting: 21 of the 30 Dow Industrials component stocks have experienced at least a 5.0 percent decline since July 28th. That's 70 percent of the DJIA, denoted by some color other than white. 19, or 63.3 percent, have seen a decline of over 6 percent. 16, or 53 percent, saw an 8.0 percent or greater decline, and 11, or 36.7 percent saw a greater than 10.0 percent decline. Seven saw declines greater than 13.0 percent - mini crashes.

The point: Somehow the Dow Jones Industrial Average has held up in spite of the fact that more than half of the component stocks have seen significant selling. The Bearish technicals have been right to warn, as evidenced by the deterioration in so many major stocks, but somehow the index in total has held up nicely. We never really saw all stocks drop sharply together. Some fell early and bounced back. Some fell in the middle of the autumn period, some later such as Exxon Mobil. It has been sort of a rolling mini-crash so far, with recoveries in some offsetting declines in others.

Further, there have been 9 stocks that have held up well throughout: AIG, Boeing, Citgroup, GE, Johnson & Johnson, JP Morgan, Altria, Prochter and Gamble, and United Technologies.

So we can once again make the point that a painful autumn decline has occurred for many stocks. However, the Index as a whole has held up relatively well. In major stock market declines, if it walks like a stock, and quacks like a stock, it drops. We haven't seen that so far, and we have moved away from the typically worst seasonal period for stocks, September/October. The question is, is that all there is? Are we out of the woods? Is the worst over? The technicals tell us no. More is to come. When is the difficult question, as is how broad-based will further decline be? Will the next wave lower again pick on some stocks and not others? We suspect that the next decline will be more severe and more broad-based than this one. As for timing, the PPT is interested in delaying it forever, and definitely until after the maestro retires, leaving his legacy, if nothing else, imaginatively perceptibly intact. Given the success they have shown recently, we must respect the fact it may be possible they can.

However, equity markets remain fragile, and susceptible to a surprise trigger event of considerable magnitude. Without one, the challenge is to forecast if the market can hold up on its own into 2006 or not. The challenge is to measure when buying is broad-based honest-to-goodness demand, versus periodic PPT induced short-covering spurts largely from those most pessimistic about the markets, that serves merely to maintain the status quo, for the benefit of derivatives underwriters, and to the detriment of profit-seeking investors and traders who depend upon both up and down volatility to generate income through dollar-cost averaging or some other time-tested conservative strategy.

Looking forward, here's a serious concern for U.S. equity markets: Huge, Bearish divergences between the MACD and all major equity markets have been spotted using monthly candlestick bars. The next several charts (courtesy www.stockcharts.com) show this Bearish divergence in the Dow Industrials, S&P 500, NASDAQ 100, Russell 2000, and Transports. Notice that the MACD Histograms diverged Bullishly from 2001 into 2003, accurately forecasting the recent two-year rally. Once they finally moved from negative to above zero, a multi-year rally occurred. We now are sitting in the opposite situation. The Histograms have been dropping sharply toward the zero line in all the major equity markets as prices have risen. History tells us that once these Histograms drop decisively below zero, there is a significant probability that prices will follow for at least a few years. Once prices reverse, the breakout lower could be violent.

The immediate (next few months) risk to long positions here is that most of these MACD Histograms are around the zero line right now, slightly above or below, meaning the moment is near for a breakout south. Could it delay a few months? Sure. But it does indicate that 2006 could see equity prices significantly lower than they sit today.

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