You cannot let current market performance change the risk tolerance you have. If you were willing to be in on the way up, you need to have the same willingness to be in on the way down.
Market performance does not change a person's tolerance for risk. If you are not liking the ride down (I have lost 40% thus far in 2008) then you need to redefine your whole financial plan, risk tolerance, and asset allocation.
I would venture to suggest you got to this point because you did not have a plan. You took action (saved for retirement) without a plan as to how that money would be invested. Make sure you plan the retirement savings plan all the way through.
The plan should have
1) a tolerance for risk, generally defined as %stocks and % bonds
2) a plan for how much to contribute (based on % of gross pay)
3) a plan for when to shift the allocation (as you get older and/or accumulate more money)
4) asset classes (large cap stocks, small cap stocks, foreign stocks, bonds, etc..) which take on the risk defined in #1.
As the value of #4 changes due to market and contributions, look at #2 and #3 for when to change the account values.
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.