Trump’s China press conference came and went.
And no further sanctions will be placed on China for its bad behavior.
Not yet, at least.
Instead, the president announced that the U.S. would withdraw from the World Health Organization (WHO), which drew criticism for being complicit in China’s coverup of the initial coronavirus outbreak.
In addition, Trump also said the U.S. would no longer give Hong Kong preferential treatment now that it’s been brought closer under Beijing’s control.
All in all, it was a pleasant surprise for bulls who feared a walking-back of the U.S.-China phase one trade deal. Depending on China’s response to Trump’s statements, sentiment could sour quickly, but for now, the market seems safe.
Or does it?
The Hong Kong issue isn’t getting any better. As China continues to exert dominance over Southeast Asia, its influence grows. Trump will likely revisit this matter when the U.S. economy has recovered, possibly culminating in an even fiercer trade war.
“Basically, the items he could have talked about he chose not to talk about, but it’s not an endpoint,” Julian Emanuel, chief equity and derivatives strategist at BTIG, explained.
“It’s a continuation on the way to more tensions.”
Alternatively, other Western leaders could follow Trump’s suit and treat Hong Kong like a part of mainland China – something the special administrative region will soon become if Beijing gets its way.
Both the S&P (+0.48%) and Nasdaq Composite (+1.29%) finished higher today, while the Dow Jones Industrial Average (-0.07%) posted a small loss following Trump’s remarks.
And though bulls might see this as good news, the truth is that stocks still appear overbought and tensions remain red-hot.
Oil, which had a fantastic month after bottoming in April, appears due for a sell-off as well. That’s not to say oil’s returning to its April lows, but it could hit turbulence in early June, providing headwinds for the general market.
And if it does, certain companies – like Apache (NYSE: APA) – could end up tumbling from recent highs.
APA, after surging from its COVID-19 low, topped out in late April. Then, a few days ago, APA made another run at a new high.
Now, after failing to set that new high, APA sits beneath a lower high as well as the 10-day moving average and the stock’s bullish trend (represented with the yellow trendline).
Should APA trade below today’s low, it might make sense to take the stock short with a trade trigger of $10.66.
From there, key support lingers just below $10. But if oil “hits the skids” in June, APA should blow past that with ease.
Potentially to the $7-$8 range before rising once more.
