We don’t have much to say in a week that ended with the terrible tragedy in Japan.   Every major equity market we track was down with the Nikkei not surprisingly performing the worst and will no doubt open down big Monday morning.  The European indices broke their 50-day moving averages and the Dow and S&P500 are the only two we track still above their 50-days after their impressive ability to rally into Friday’s close.

Commodities got clocked on growing fears of a China not-so-soft landing and the Saudi “day of rage” that never happened.  The Aggies collapsed and wheat was down an astounding 15 percent.  Crude fell over 3 percent and copper was off 6 percent, which is now down for the year.  Who was that institution which reportedly owns 50 percent of the world’s copper stock?

We charted the performance of the Nikkei and $/Yen after the 1995 Kobe Earthquake, which killed over 6,000 people.  Japanese stocks fell 25 percent and didn’t bottom until 5 months after the January 17 quake.  The Yen strengthened 18 percent and only reversed after the dollar’s famous “Rubin bottom” in April.

As the market obsesses on Japan’s high level of public debt, don’t forget Japan has the best international investment position of any country in the world.  Japan holds over $3 trillion of net assets abroad, some of which will surely be repatriated to finance the cost of rebuilding and could cause the Yen to strengthen even further.

Apple is the key stock to watch here, in our opinion.  It bounced nicely off its 50-day on Thursday and finished strong into Friday’s close.  If Apple stays strong, it may limit the downside to the overall U.S. market.   We will become more aggressive sellers if the S&P500 breaks the 1294-1300 range, however.

Nevertheless, this is no time to be a hero and the small correction has not made the buy case compelling just yet.  We do respect the market and are impressed that the S&P500 is only 3 percent off its high given what is going on in the world.  Stay tuned and please make an effort to do whatever is in your power to help out our Japanese friends in their time of need. (click here if charts are not observable)