Fears about the second wave of coronavirus infections have hit airline and cruise travel stocks at market open, pushing down the S&P 500 by 1.9% to 2984.34. The S&P 500 futures initially traded after news of a few countries opening their borders in anticipation of muted summer holidays emerged.
Greece, a popular holiday destination whose economy virtually depends on tourism dollars, announced that international tourists from 24 countries would be allowed into the country as from July. Similarly, the UK’s Health Secretary Matt Hancock triggered a media frenzy when he indicated on an ITV morning program that he “wouldn’t rule out” a summer vacation, saying he was “a little more optimistic” than he previously was about some international travel resuming.
These events initially pushed up airline stocks, with United Airlines, Delta Airlines, American Airlines and Boeing all gaining in premarket trading by double-digit percentages. However, the optimism seems to have dissipated, with United Airlines and American Airlines shedding 8.46% and 7.95% on market open. Cruise company stocks are also trailing on the S&P 500, led by Norwegian Cruise Line Holdings at -7.9%, and Carnival Corp at -7.73%. Royal Caribbean Cruises is down 7.5% as at the time of writing.
The market opened with a downside gap, sending the S&P 500 below the 3028.3 resistance line and towards the 2961.4 support. However, the index has pulled up slightly from this support level, but not by much. This action leaves the S&P within the former resistance zone, which now functions as a support area.
A break above the area, with the price lows staying higher than 3028.3 is required to maintain the ongoing uptrend. This also provides a pivot for price to attempt taking out the 3070.8 and 3137.0 resistance levels. Clearance of the 3137.0 resistance as well as the 3267.8 resistance formed by the 88.6% Fibonacci retracement from the February 2020 swing high to the March 202 swing low, is required to maintain the uptrend.
On the flip side, failure to break above the price zone may indicate a stall in the uptrend. A break below 2961.4 is required to resume the downside move, which then targets the 2844.3 and 2707.7 price support levels. In the same vein, a push above 3028.3 which fails to advance beyond 3070.8 or 3137.0 may indicate that the upside has stalled. This allows price to aim for the sequence of support targets as indicated.