The stock market is getting whacked. The question now for many investors is, what to do about it.

The first thing to do is to understand what's going on -- in part because simply saying the stock market is getting whacked doesn't tell the whole picture.

So let's sketch that in and then decide whether to sell, sell a little, do nothing or buy.

First, the Dow Jones industrials fell 143 points on Friday to 16,027. The Standard & Poor's 500 Index dropped 17 points to 1,816 --and the Nasdaq Composite Index slid 54 points to just under 4,000.

In addition, the Nasdaq-100 Index tumbled 41 points to 3,447. The Russell 2000 Index tumbled 15 points to 1,113, and the Dow Jones Transportation Average gave up 69 points to 7,362.

Related: Biotechs Struggling To Find A Bottom

For the week, the Dow lost 2.4 percent, with the S&P 500 off 2.7 percent and the Nasdaq down 3.1 percent. The Nasdaq-100 tumbled 2.6 percent. The Russell was down 3.1 percent and the Dow transports 2.8 percent.

A Correction?

The real damage is visible if you look at declines -- since these indexes hit either all-time highs or multi-year highs in the last few weeks. Dow and S&P 500 are down 3.6 percent and 4.3 percent. The Dow transports are down five percent. The Russell 2000 is off 8.3 percent. The Nasdaq has lost 8.5 percent, and the Nasdaq-100 is down a whopping 12.1 percent.

The index losses don't mean the overall market is in a correction yet; a correction being popularly defined as a decline of 10 percent or more from a recent high.

The Nasdaq and Russell 2000 indexes very nearly are, however, and the Nasdaq-100 definitely is. Twitter (NYSE: NFLX) is down 28.7 percent since hitting an all-time high of $458 on March 6. (NADSAQ: AMZN) has dropped 23.6 percent since peaking at $408.06 on Jan. 22.

Watching The Momentum Stocks

Biotechnology stocks, meanwhile, are getting slaughtered. Gilead Sciences (NASDAQ: HALO), which has been working on a drug to treat pancreatic cancer, is off 59 percent since peaking on Jan. 24.

The damage is being suffered most by momentum stocks: the stocks that screamed for attention as they posted huge gains in 2013 and into this year. Computerized trading tools have decided the stocks were overbought, which they were, and will drive the prices lower until they get too low.

But keep this in mind: Thirteen of the 30 Dow stocks are still ahead on the year, led by Merck (NYSE: CAT), both up about 11.7 percent. Goldman Sachs (NYSE: GS), Visa (NYSE: V) and aerospace giant Boeing (NYSE: BA) are the laggards -- down 13.8 percent, 11.7 percent and 10.6 percent, respectively. More than 230 S&P 500 stocks are still ahead on the year.

Time To Pay Attention

So what should you do? If you've been playing the hot stocks and made a bunch of money, it's probably time to sell at least some of your stake. If you haven't thought about what will trigger a sell, now's the time. A 10 percent decline from, say, Friday's close is probably appropriate. That way you've limited your downside. If the stock doesn’t hit your trigger but recovers, then you're in the clear.

If you've just bought in, decide what price is appropriate to limit your losses.

But if you're a mutual fund or exchange-traded fund investor, selling in a panic is probably the wrong thing do. The blow-off in stocks has been nasty, but it is possible the selling has been extreme. Momentum measures suggests a bottom is starting to form. It may take a while to emerge, however. And even if a bottom is formed, that doesn't mean those stocks are going to shoot higher.

The market is selling off after a fabulous run-up since March 2009. There's been too much froth generated by a hot market for initial public offerings. But a successful IPO does not mean a successful stock. Meanwhile, there are worries about China, Japan and Russia and Ukraine. Bond yields are falling because of an undefined unease about the domestic and global economies.

Spring is often an uncomfortable time for the stock market. Therefore, it will pay to pay attention.

Related Articles
  1. Economics

    Long-Term Investing Impact of the Paris Attacks

    We share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
  2. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  3. Economics

    Will Recession Become Reality in 2016?

    Due to creative measures by central banks, there is no telling when a recession will actually occur, but natural economic forces will eventually win.
  4. Investing

    A Surprising Way to Seek Income as Rates Rise

    As an alternative investment, income-seeking investors may turn to dividend-paying exchange traded funds (ETFs) as a way to seek both income and growth.
  5. Stock Analysis

    Will the Stock Rally Last Past Christmas?

    The stock market can't seem to make up its mind. Will investors end up with coal for Christmas or might their wishes come true?
  6. Economics

    The Biggest Oil Producers in the Middle East

    Discover which countries produce the most oil in the Middle East, a region long known for its influence on international petroleum markets.
  7. Economics

    The Biggest Oil Producers in Africa

    Discover which African countries produce the most oil, and learn more about which domestic and international oil companies operate in each country.
  8. Economics

    The Biggest Oil Producers in Latin America

    Find out which countries produce the most oil in Latin America, and learn about some of the biggest oil companies operating in each country.
  9. Stock Analysis

    The 6 Biggest Russian Energy Companies

    Learn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
  10. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  1. What is the long-term outlook of the metals and mining sector?

    An industry agency council was established by the World Economic Forum in 2014 to serve as an advisory board on the future ... Read Full Answer >>
  2. What is the railroads sector?

    The railroads sector is comprised of publicly traded stocks for companies that operate railroad tracks and/or trains. Railroad ... Read Full Answer >>
  3. Who are Amgen Inc.'s (AMGN) main competitors?

    Biotech giant Amgen Inc (AMGN) bills itself as one of the first biotechnology firms. It was founded in 1980 and has grown ... Read Full Answer >>
  4. What's the most expensive stock of all time?

    Back in late August 2012, Apple’s (AAPL) stock price reached nearly $700 per share. The stock has since split but has yet ... Read Full Answer >>

You May Also Like

Trading Center