The market finished last week mostly flat. But anyone that watched the market each day can tell you the price action was anything but unchanged. For the week, the price barely budged. But on a daily basis the market shifted, violently, between big losses and huge gains.
Volatility was incredibly high as tensions rose in Europe after Italian interest rates on bonds rose to uncharted areas. The increase in yield, which results in a decrease in price, sent tremors through Europe's financial system. All stocks, especially the big banks, were decimated.
Although the bears came back on a few occasions, the bulls held steady. And buyers kept buying despite the clearly outlined problems in Europe. The near term momentum is definitely up for grabs, but the bulls are in control of the larger trend.
When the market is so seemingly undecided, trading can be cumbersome. And to make matters worse, much of the price momentum over the past month has been generated by news in Europe. Not only is news from Europe harder to analyze, it is also announced when the U.S. market isn't open. And most of us are sleeping at that time too.
The stress in Europe will not go away any time soon. In fact, it's likely to get worse. I would have thought the $1.4 trillion bailout would have relieved the tension completely. But traders from Europe remain on high alert, and the market is likely to be just as volatile this week as it was last week.
The debt debacles in Europe have been painful to monitor, and the huge reactions to the euro exacerbated the movement in the U.S. stock market. But today, Monday, Warren Buffett gave us something to focus on, albeit briefly, that's apart from Europe.
Over the past few months Warren Buffett has accumulated shares of IBM (NYSE: IBM). And he didn't just buy a few hundred shares either. Warren Buffett bought $10.6 billion worth, which was over 5.4% of the total market capitalization. The purchase indicates that Buffett holds no ambivalence about investing in this current volatile climate.
Additionally, Warren Buffett almost never owns a technology company. Despite his friendship with Bill Gates, who also sits on Berkshire Hathaway's (NYSE:BRK.A) board, Warren Buffett does not usually invest in technology stocks. So the purchase of IBM, which is a technology stock, indicates that Warren Buffett sees an awfully big opportunity in that sector.
Warren Buffett is not a trader, and he often takes pride in his inability to pick a bottom, but he's one of the best investors around, and it's still a good sign he is currently making new investments.