The Dow’s first stop could be 4,000 points lower if there’s a real selloff

Prudent investors prepare for different scenarios. Right now, the stock market is assuming two things.

First, regarding North Korea, that people in power on all sides are rational. Second, a buy-the-dip mentality will prevail and machines that trade large volumes every day will not make mistakes. To understand that latter scenario, let us look at a very short-term chart and a longer-term chart.

Very short-term chart

Please click here for the very short-term chart of Nasdaq 100 futures NQU7, +0.24% Popular Nasdaq 100 ETF QQQ, -0.90% traced a similar chart. I picked the Nasdaq 100 because it contains popular FAANG stocks such as Facebook FB, -0.76% Apple AAPL, -1.20% Amazon AMZN, -1.33% Netflix NFLX, -0.13% and Alphabet GOOG, -0.95%GOOGL, -1.10%

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