OMG!

Oh, spit!

The sky is falling!

Stop. To steal a line from Cameron Crowe's 1989 Say Anything: "You must chill. You must chill."

Yes, I realize that the market's imploding. I get it. Over the past two weeks, the Dow Jones Industrial index has lost nearly 10% of its value. Yesterday, thanks to a brief relief rally, the Dow just missed posting its longest consecutive losing streak of the past three decades. But while up one day and down the next, the net effect is a lot of pain for a lot of investors.

Scanning the Fool headlines for today alone, we find Walter Energy (NYSE: WLT) down 25% on an earnings miss, Western Refining (NYSE: WNR) down another 20% on its own Q2 disappointment, and Dendreon (Nasdaq: DNDN) topping 'em all -- plummeting 65% on the news that -- shocker -- not everyone can afford to pay $93,000 for its new cancer treatment. And while I'm fortunate enough not to own any of these particular bombs, I still feel your pain. My shares of Micron (NYSE: MU) are today worth about 20% less than what I paid for them just a few months ago -- and Micron didn't even report earnings! Collectively, we as investors have just seen nearly four months' worth of gains -- wiped out in a matter of days.

Scary.

Yet if you're reading this, it means I'm still typing. I haven't jumped out any windows. (Not that it would help. I'm on the ground floor.) That sort of dramatic overreaction doesn't help. Panicking as your stocks plummet won't slow their fall, and it won't salvage your portfolio -- it'll just lock in your losses.

Well, what should we do?
You should thank the good Lord for days like today, and like May 6, 2010, which provide object lessons in the volatility of the markets. Maybe it was the crisis in Greece that caused last year's "flash crash." Maybe it was the debt crisis, or the half-measures that averted it, that caused today's selloff.

Whatever the reason for the market's sudden bout of volatility, it does at least remind us that asset prices can go down as well as up. Otherwise, we might do something stupid -- like, say, pay nearly 400 times forward earnings for a share of salesforce.com (NYSE: CRM). Or buy a $200,000 house for $300,000, finance it with a no-money-down subprime ARM at 2% with a six-month balloon payment, and then wonder why we can't afford the mortgage when the rate resets to 6% and our monthly payments suddenly triple.

Hypothetically speaking, and present company excluded, of course.

No, no -- what should we do about the stock market?
Oh, right. Well, just keep on doing what you've been doing. I did say "present company excluded," right? So keep collecting and depositing your paychecks. Keep researching high-quality, low-priced stocks. Keep buying shares at a significant margin of safety. And, as always, keep purchasing no more of any given stock than you can afford to lose. (Because, after all, we all make mistakes from time to time.)

Once you've got that down, though, it's time to get greedy.

Greed is good
See the opening lines of this column up above? A lot of investors are saying things like that right now. Even the pros are panicking. The hedge-fund types? They're worrying about making their quarterly numbers, and they're selling out of positions they love, in a frantic attempt to staunch the bleeding.

Meanwhile, you should consult your stock "wish list" -- you've drawn one up, right? -- and see whether the panic selling has pushed any of your favorite stocks down below your hoped-for buy-in price. Today just might be your lucky day.

Further fearless Foolishness:

The sky has fallen before, Fools. Previous versions of this article ran on Fool.com in 2007, 2008, and 2009.