The stock cartel is dying. And if the cartel dies, some experts believe it could take the stock market with it.

That's the easiest way to sum up how some experts see the volatile events of the past week in the equities market. At approximately 3:15 p.m. on Friday, July 20, traders in stock index futures and their cartel cousins, the program traders, lost control of the stock market that they had been manipulating skillfully up for many months.

Monday's result -- the biggest and most frightening drop for the Dow Jones industrial average in many months -- made news and shocked the average investor.

But the cartel's downfall -- and the effect it had on share prices -- came as little surprise to people who have been closely monitoring the stock market. After all, a select group of blue-chip stocks has been striving for record levels at the same time that the bulk of the stock market was getting, as they say, "whacked."

Wall Street was being particularly harsh on companies that dared to report worse-than-expected second-quarter profits. As one trader said last week, any company with disappointing earnings was promptly "executed."

It was clear by the middle of July that a significant shift was occurring in Wall Street's attitude toward stocks. Fundamentals -- such as rising interest rates overseas, the slowing U.S. economy, the savings and loan mess and the stalemate on federal deficit reduction talks -- were once again important to the stock market. These factors had been ignored for months as Wall Street traders became fascinated by the Dow's ability to rise in spite of all the bad things that were happening.

Not everyone, of course, would agree that professional traders can control the direction of the market. But in recent months, more and more experts have been arguing that the influence of investment firms and their major clients who trade stock index futures contracts has risen as the average investor conceded control over the market.

And many professional traders seem to have become believers in what could be called "the myth of the Dow," which states that even in an economic recession it is safe to own blue-chip stocks.

A footnote to that myth is that even if blue-chip companies did get hurt by a downturn in the economy (a fact that many believers aren't even willing to concede), the clique of program traders and stock index futures jockeys (the cartel, for short) would still be able to keep this small group of stocks from tumbling.

The belief in the ability of the program and stock index futures traders to keep share prices buoyant was dealt a severe blow that Friday. At the beginning of the day's final hour, bullishness was rampant. Stocks were supposed to go up in price, and the Dow was supposed to finally break through the elusive 3000 mark.

Even the New York Stock Exchange reported publicly that there were many more "buy" orders for stocks in the last minutes before the expiration of the July stock-index futures and options contracts than there were sell orders.

But then something happened. The "buy" orders that produced a positive imbalance for the market just minutes before were suddenly withdrawn.

One explanation for the reversal was that poor earnings reported by Texas Instruments, the electronics company, had produced a quick change in sentiment. But there was also talk around the stock index futures market that someone had pulled a fast one.

The "buy" orders being reported to the NYSE, the gossip went, were intended to be a trap. While the majority of the cartel's traders would be anticipating a run-up in stock prices, the traitor in the group knew that wouldn't happen because the buy orders were bogus. That sort of shenanigans would be enough to sink any cartel.

Whether or not there was a double-cross is almost secondary in importance. More important is the fact that if professional traders believe someone pulled a fast one, the cartel becomes less powerful and it won't be able to hold the stock market together the next time something fundamentally bad happens to the economy.

But don't go burying the cartel quite yet. The ability of the Dow -- taking its cue from stock index futures traders -- to halve its intra-day, 108-point decline last Monday will, undoubtedly, allow the belief in the stock cartel's invincibility to linger.

But the change from a trader-driven stock market to a market driven by fundamentals would seem to be irreversible. And if the economy continues to weaken, that means that stock prices are likely to decline a whole lot more in the face of economic reality.

One shot of reality was delivered last week by the Treasury Department, which reported that the United States had a budget deficit of $11.22 billion in June, a month in which there is ordinarily a surplus. In June 1989, for instance, the surplus came to $7.79 billion.

Reality also took the form of an increase in interest rates over the past week in Japan, where inflation and an over-robust economy are the problems.

What that means is that the United States will have a difficult time getting its own interest rates down. That hurts the chances of an immediate pickup in the faltering American economy.

Even the pessimists on Wall Street don't believe the stock market is getting set for a big crash -- at least not at the moment. There was a general belief last week that stock prices would be able to rally one more time before getting clobbered for good.

When will Wall Street face its next crisis? Perhaps between Aug. 7-9, when the U.S. Treasury will probably have to sell another record amount of bonds. This could put more upward pressure on domestic interest rates -- hurting both the stock and bond markets. John Crudele is a columnist for the New York Post.