Coming Week: Fear Reigns

The credit crunch will remain market participants' foremost concern next week as they take the weekend to digest the stock market's plunge.

For investors who have withstood several mini-corrections over the past few years without a 10% pullback, the typical response to a bad week has been to buy the dips. Friday afternoons often meant loading up long positions and waiting for the merger and acquisition deal announcements to flow. Merger Mondays became status quo.

Not this week. The major stock market indices may be on their way to a more serious decline.

"Much of the market's recent gains were undoubtedly riding on the back of what was still-ample global liquidity and takeover speculation," writes Liz Ann Sonders, chief investment strategist at Charles Schwab. "Because some of that liquidity was of the 'financially engineered' variety and appears to be drying up a bit -- and the pace of takeovers is now in question -- the bears took the reins."

The Dow Jones Industrial Average fell 4.2% in the week and is 5.2% below its 14,000.41 high on July 19. The bulk of the losses occurred in the 311-point and 200-point drops on Thursday and Friday. It closed the week at 13,285.47 after a brief attempt at a rebound.

The S&P 500 finished at 1458.95, down 4.9% in the week and 6.2% from its high. The Nasdaq Composite fell 4.7%, putting it 5.8% lower than its July high.