On Monday investors were squarely focused on Japan.
Like it or not, on Wall Street the tragedy involves more than an emotional response to the shared heartache of these terrible events.
It also requires cool and strategic decision making in an attempt to protect and profit in an environment of uncertainty.
What should you be watching? How should you position now?
JAPAN IMPACT: STOCK MARKET
World stocks hit a six-week low on Monday driven by a 7.5 percent slide in Tokyo shares. Both the Dow and S&P also traded lower though the sell-off here in the US was not nearly as severe.
What's the trade?
Fast trader Steve Grasso is watching key technical levels on the S&P. “If we break 1288 the next key level is 1275, the Egypt bottom.” And if that doesn’t hold the next level to watch is 1257, “that’s flat on year,” Grasso says.
Jon Najarian suggests being greedy when others are fearful. “A breakdown toward 1258 is a buying opportunity,” he says. Looking at fundamentals, he thinks Japan will be back on it feet “faster than most people think.
Jeff DeGraaf, institutional investors top ranked technical analyst for the past six years agrees. “The trend of the market is still higher," he says. "Add to positions at oversold levels,” he says. (Click here for our entire conversation with DeGraaf.)
JAPAN IMPACT: TECH
Tech shares were among the hardest hit on Monday with investors running for the exits on concerns that weakness in Japan will harm this sector, most.
Meanwhile, the desk has a few key names on the radar after UBS released a report showing companies that derived a substantial amount of revenue in 2010 from the Asia-Pacific region.
Net App 10%
Brian Kelly thinks the tech trade may be breaking down for 2011, broadly. He points to a number of signs such as anecdotal evidence from Finisar and Texas Instruments.
He also points to the macro slowdown in Europe and now troubles in Japan. Putting all the pieces together “we’re looking at an economically sensitive sector and an economy that’s starting to slow.”
Trader Zach Karabell is on the other side of that trade. “I’m not sure we’re seeing a shift in the big picture. I’m not ready to call a change in the global marco environment,” he explains. He also cautions not to confuse Asia-Pacific with Japan only. “Asia Pacific includes China, Taiwan, Thailand, Vietnam Korea and more,” he says.
JAPAN IMPACT: ADRs
Stocks of many Japanese companies took a hit after the earthquake. Has the sell-off presented any buying opportunities?
If you feel compelled to look at ADRs, Zach Karabell suggests Toyota. However, largely he suggests moving to the sidelines, until events plays out a little more. "I’d hesitate to wade into these areas," he says.
Jon Najarian thinks Toyota as well as Honda and Sony belong on the radar. "I think these companies will be back in production mode faster than most people think. And they have factories all around the globe."
JAPAN IMPACT: CLEAN UP
The traders are also looking at the companies involved in the clean-up efforts in Japan.
What’s the trade?
Jon Najarian has spotted unusual options activity in Clean Harbors. "We’re seeing a pick up in volume and volatility," he says.
CHART OF THE DAY: EWJ
The traders are closely watching the action in the iShares MSCI Japan Index.
What’s the trade?
Brian Kelly is short but he made the bet before the earthquake. "I was betting on a stronger yen hurting Japan’s exports," he says. "And I still am."
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CNBC.com with wires.