"People are saying, 'We like the stock, we like the fundamentals, we like the long-term prospects, there might something really worthwhile here,' but at the same time they want to protect themselves on the downside," Paul Marshall, portfolio manager at Atlanta Capital Management Co., which owns about 900,000 shares, said in a telephone interview Oct. 28. The Atlanta-based firm manages about $13 billion.
he Chicago Board Options Exchange Volatility Index, known as VIX, has tumbled 46 percent to 24.53 since peaking this month on Oct. 3. The volatility gauge is heading for a record monthly retreat as the S&P 500 climbed 14 percent, poised for its biggest monthly gain since 1974.
Investors increased short sales on Green Mountain to 12.6 percent of shares outstanding as of Oct. 20, a jump from 7.3 percent on Oct. 4 and the highest level since March, according to data compiled for Bloomberg by researcher Data Explorers of London. In a short sale, a trader borrows a stock and sells it, hoping to profit from a decline by replacing it at a lower price.
"You kind of hold your breath day-to-day to see what's going to be announced next or who's going to have a view on the company," Dan Veru, chief investment officer at Fort Lee, New Jersey-based Palisade Capital Management LLC, which manages $3.4 billion, said in an Oct. 28 telephone interview. "There are companies out there with good valuations, where there aren't as many question marks."
Eoin Treacy's view Peaks
in the VIX
usually coincide with important troughs in the S&P 500. Rather than monitoring
absolute levels, clear evidence of top formation development is what we generally
look for. The S&P 500 posted a failed downside break on October 4th. Concurrently,
the VIX did not confirm with a upside break, lending additional credence to
the hypothesis that a relatively important low was forming.
The VIX has now fallen below 30 and a clear upward dynamic, held for more than a week or two would be required to question current scope for additional downside. (Also see David's comments on the S&P 500 above.)
Green Mountain Coffee Roasters is a notable laggard in an otherwise firm sector. The share rallied impressively for most of the year but lost momentum from July and broke the progression of higher reaction lows two weeks ago. It fell abruptly before finding at least short-term support in the region of $60 but a sustained move above $84 will be required to begin to suggest demand is returning to medium-term dominance.
Elsewhere in the coffee sector, Peet's Coffee & Tea remains in a consistent medium-term uptrend. It found support in the region of the 200-day MA in September and moved to a new high last week. While somewhat overbought in the very short-term a sustained move below $50 would be required to begin to question medium-term scope for additional upside. Canada's Tim Horton's has a similar pattern.
Starbucks is also posting new all time highs and remains in an equally consistent medium-term uptrend. A sustained move below $35 would be required to begin to question medium-term scope for additional upside.
The beverage sector is generally outperforming. National Beverage Corp has posted a rivetingly consistent progression of higher reaction lows since late 2008 and while overbought in the short-term a break of that sequence would be required to question the potential for additional upside over the medium term. Brown-Forman Corp and Diageo bounced emphatically from their respective 200-day MAs to hit new all time highs. SAB Miller hit a new high on Friday.
Ambev has lost momentum somewhat but remains above the 200-day MA and bounced well from the early October low. A sustained move below $30 would be required to question the consistency of the uptrend. Coca Cola has a similar pattern.
Remy Countreau broke briefly below the 200-day MA in October but has rallied back above it impressively and a sustained move below €50 would be required to question medium-term scope for additional upside.