Stock Investors Are Jittery

While Tuesday's sharp drop in global stocks may have seemed like panic selling, it's far from the 2008 market meltdown that devastated many investors' portfolios.

On most trading floors, in fact, the mood instead was serious concern—not hysteria—that the snowball of global and geopolitical events was about to choke off the market's two-year rally.

The huge market drop, then, was not 2008 all over again, but rather a warning shot that many investors have their fingers on the "sell" button should the Japan natural disaster or the Middle East tumult take a serious turn for the worse.

"If we can avoid a (further) major catastrophe in Japan and people are capable of going back to work and society can go on there, then there is a chance for this only being a corrective-type pattern," said Brian LaRose, strategist at United-ICAP in New York. "Fundamentally this would appear to be a safety play, not necessarily a panic move out of the market."

The most serious question at this point seems to be how bad the nuclear situation is in Japan. Should a Chernobyl-level meltdown occur, that also would strangle Japan's economy and put a huge dent into global demand, in addition to the unimaginable human toll.But the chance of that happening is seen as remote, at least for now.

The sell-off was more about buyers heading for the sidelines than sellers taking over the market.

A lot of people are saying, 'I don't know what's going to happen. It's uncertain, therefore I'm going to take profits,' and then you have that selling. And of course, some of it is just panic. You want to get into cash and just wait to see what happens.

The delicate nature of the situation in Japan made impulse-selling tough to resist, as the world literally was watching which way the wind was blowing to see where radiation from the nuclear plants would drift.

You liquidate and you get a position where you can get defensive. Tactically you get ready to do something because there's so little information. If we're using the wind direction to make an investment decision, that's not good strategy. So go to the ground.

http://www.cnbc.com/id/42090835