Trade War Likely To Usher World Into Chaos: China

The Global Times, often thought of as China's state media outlet, asked on the trade war, "Is the world on the eve of chaos? It appears so."

They also expected that the "tit-for-tat" moves could cause "domino effects" specifically citing ZTE's US penalties and said "China should prepare for the worst."

Interesting, the US also prepped markets this week with its own warnings. Commerce Secretary Wilbur Ross talked to financial asset risk by saying that there was "no level of the stock market that's going to change policy."

Micron's China Injunction Tit-For-Tat For ZTE?

The China-warning report cited above was dated July 3rd came in tandem with the recent Micron news. It was reported yesterday that sales of Micron (NASDAQ:MU) semiconductor products would apparently be limited in China after losing a patent case.

In another Global Times report when speaking directly on ZTE they were quoted as saying, "we should prepare to strike back."

And so through Micron they have.

The parallel messages of building trade war risk by the White House and the Government of China means investors should all take heed.

Two Monday's ago we went from bullish to cautious on tech stocks based on the conflict.

Semiconductor Stock Downside 

Semiconductor stocks are among the most exposed to a trade war between the US and China.

We wrote on Sunday that the "semiconductor chart shows downside." Combine that with the negative news of Micron and the rest of semiconductors could continue to see weakness.

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Exactly where the ETF SMH (NYSEARCA: SMH) closed July 3rd represents important support. A closing break below that 100 level would likely mean more downside in semiconductor stocks.

That downside could get ticked as investors assess the potential of direct corporate earnings repurcussions as we saw with ZTE and we may have just seen with Micron.