The S&P's first-half decline of 12.9% was the steepest since 1940 for a year Americans have gone to the polls to choose a president. What's the scoop here?

As usual, it's not hard to discern at least some of the reasons for the market's sharp drop: soaring energy prices; the ongoing turmoil in housing and credit; rising unemployment. More difficult to piece out is whether these trends are about to get worse, or improve.

The market itself should give us a good deal more clarity soon. You might even say we're approaching a moment of truth.

Technically, stocks are about as deeply depressed as they ever get without launching a powerful bounce lasting several weeks (or longer). I'll be watching the bounce very carefully. If it's healthy and vigorous, with ample breadth and volume, I'm willing to increase my Profitable Investing subscriber's equity allocation, even if we have to pay somewhat higher prices.

On the other hand, a so-so rally like the one we had off the March lows would signal more trouble ahead. In that case, I've suggested that my Profitable Investing subscribers boost their cash reserves and take other defensive measures.

For now, it's OK to buy stocks, but do it gingerly and sparingly. Focus on names with safe, above-average dividend yields. These outfits boast enough fundamental earnings power to ride through almost any economic scenario you might imagine.