On reaction, is almost impossible to try to do something unless you make sure to stay slightly out of his range and punish a whiff with Ftilt/Dtilt/Dashattack/grab. As Goofy said, moving a lot to get him to misspace something could come in handy.
I wouldn't suggest SL, you never know if it would be important to keep it fresh, but it's an option, I guess.
Now, if he gets predictable with it, you can just Tornado before he performs it, you will eat it and get a lot of damage for a single read. That's how dumb Nado is.
Theorically if you predict it, you could also PS it and punish in many ways, but that's hard theorycraft and it's not reliable to attempt it.