The corporate earnings growth of companies in the Dow Jones Industrial Average is falling at a staggering rate—something I started warning about during the second quarter of this year. Sadly, the trend of declining corporate earnings growth will only continue. All the pieces are falling into place now. In these pages, I have been rigorously warning about rising key stock market indices; in the third quarter of 2012, the Dow Jones Industrial Average rose 11.4% on the news of QE3 and hopes that corporate earnings growth would hold. But that optimism was crushed when companies like International Business Machine Corporation (NYSE/IBM), Caterpillar Inc. (NYSE/CAT), and United Technologies Corporation (NYSE/UTX) announced their third-quarter 2012 earnings projections for the fourth quarter of 2012 and 2013. It would be nice if those were the only companies that fell short on their earnings, but unfortunately many more companies are failing to meet their corporate earnings targets. Other Dow Jones Industrial Average firms had negative news to share. 3M Company (NYSE/MMM) reported a fall in third-quarter revenue and slashed its target for full-year corporate earnings. Exxon Mobil Corporation (NYSE/XOM), the world’s largest oil company and a component of the Dow Jones Industrial Average, reported quarterly corporate earnings that were seven percent lower than the same quarter last year ago. The reason? Exxon says production has been declining and becoming a challenge for the company. (Source: Reuters November 1, 2012.) Another Dow Jones Industrial Average company, Pfizer Inc. (NYSE/PFE), reported a decline of 14% in third-quarter corporate earnings. The company’s total revenue fell 16%, with U.S. sales falling by 18% and international sales dropping by seven percent. (Source: Associated Press, November 1, 2012.) Looking at the broader picture, the Dow Jones Industrial Average appears even weaker in the near term. Below is the chart of Dow Jones Industrial Average, which clearly shows the breakdown in the index’s advance. Chart courtesy of www.StockCharts.com What’s interesting to note in this chart is that the Dow Jones Industrial Average has fallen below the uptrend it started in June. The support level that was formed with the September break to the upside (following the announcement of “QE3 unlimited”) has been broken as well. From a technical analyst point of view, these are two bearish omens. As I have been warning for some time, corporate earnings growth is crucial for any stock index to rise. If earnings pull back, there is no real reason for key stock indices to increase. Many troubles lie ahead for the Dow Jones Industrial Average. The world’s most followed stock market index looks weaker both technically and fundamentally. Michael’s Personal Notes : Germany’s central bank is the second biggest holder of gold ... Read More