Why I think S&P500 is falling below 1000 point soon ?

Most of the retail investor were not expecting this market can outperform inspite of negative headline, Euro zone crisis and downgrade fear. S&P500 has added 68 points in 1 month, and 87 points in 3 month, 194 points since Oct 3rd, and 164 points since Nov 25th. On Feb 2nd, S&P500 closed at 1325 point. Now lets analyse the impact of top 10 S&P500 companies with the rest of 490 S&P500 companies.

Comparison of Top 10 S&P500 companies with rest of the S&P500 companies

The S&P 500 Index is a free-float capitalization-weighted index, which includes 500 large-cap common stocks traded actively in the United States. As you can see the Top 10 S&P500 companies XOM, AAPL,IBM, CVX, MSFT, GE, PG, T, JNJ, and PFE forms 20 % of weight index for S&P500 index, while rest of the s&P500 forms 80 %. Since last 1 month Top 10 S&P500 companies added 142 point or 7.04% in S&P500 index with AAPL adding 53 point and MSFT adding 29 point, while rest of the S&P500 were down 74 point or -0.93%. 

In last 3 month, TOP 10 S&P added 170 points or 8.44%, out of which AAPL, GE, MSFT and XOM leading from the front, while rest of the S&P500 added only 23 point or 0.29% 

Since Nov 25th, Top 10 S&P500 added 288 points or 14% out of which AAPL added 79, GE added 45.28, and XOM added 42 points, while rest of the S&P500 were down by 124 points or -1.57%. 

So if we look at the overall S&P500, the top 10 companies clearly dominated and moved the entire S&P500 index single handedly and most of this companies are in overbought zone. Most of the time stocks make a correction of 3-5% and sometime even 10% from overbought zone. If that thing happen just Top 10 companies will drop 60 to 100 point.

On Feb 2nd, S&P500 index closed at 1325 point.

Now lets remove 1 month gain of 142 points of Top 10 companies, then S&P500 will be at 1183 and if we remove even 40 point from rest of the S&P500, it will take S&P500 we at 1140.

If we remove 3 month gain of 170 point of Top 10 companies, then S&P500 will be at 1155 and if remove 40 point from rest of S&P500, it will take S&P500 at 1115.

If we remove 288 point gain since Nov 25th of Top 10 companies, then S&P500 will be at 1037, and if we remove 40 point from rest of S&P500, it will take S&P500 index to 1000.

What this means is that if the situation goes worse in Europe and market comes to reality, S&P500 will easily fall below 1000 level or even lower then 900, if rest of the weak S&P500 companies joins the slide.

Just because Top 10 companies are doing well, doesn't mean whole economy is doing well. Baltic Dry Index is at 651 and its below 2008 stock market crash and its pointing out dangerous road ahead. This is scary but  that's the reality what main stream media doesn't show. All I can say is this stock market is heading for big crash soon.
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