On Thursday morning we got a fairly good sign from IBM's (IBM - commentary - Cramer's Take) upside earnings surprise and the report that jobless claims fell 20,000 to 478,000 last week. There was also news that the Treasury Department is considering a plan to take ownership in many U.S. banks. Unfortunately, the market followed the same old pattern of gapping up and then selling off in the afternoon.

Meanwhile, the credit market continues to remain tight as the cost of borrowing in dollars soared to the highest level this year. So far, the coordinated interest-rate cuts worldwide have failed to revive lending among banks. Until this situation corrects itself, it is likely to keep a lid on any upside momentum in the market. We need the credit markets and financial institutions to stabilize to provide a base from which to move higher.

In my column on Tuesday I said that I was considering dipping my toe back into the water on the long side for a short- to intermediate-term trade. Readers who have been following my columns know that I've been negative on the market and financials for over a year now. The only exception was a short-term long call I made on March 12, and then signaled that the rally had run its course on May 9 after my targets were hit on the indices.

I started warning readers to stay away from the financials on June 27 of last year and then again on Aug. 17, 2007. I followed with warnings of a market top in the indices on Oct. 12, 2007. According to my count, I have cautioned investors to stay liquid, take profits and stay away from the market and financials in 47 columns since those dates. Every time you heard bottom-calling from market commentators, I warned readers to ignore the talk and stay in cash.

Now many readers want to know why I am starting to alter my stance with all the negativity and problems in the market and everyone predicting the worst is yet to come.

The main thing that may be confusing longtime readers is that they know that I look for strong growth stocks to be leading the market higher and wait for solid breakouts from intermediate- and long-term bases before I normally take positions. However, there are times when the market becomes so stretched to the upside or downside that the risk-to-reward scenario is in your favor.

That situation may be in the process of developing right now. For example, through Thursday, the market has dropped seven days in a row. The S&P 500 has fallen over 29% since the beginning of September. In addition, new lows on the New York Stock Exchange rocketed to more than 1,800 issues Monday, the highest since Black Monday in 1987. There were only three other dates matching his extreme, and all were at or very near a market low -- Oct. 19, 2007, May 19, 1970 and Aug. 29, 1966. To top that, new 52-week lows on the NYSE hit an amazing 58% of all stocks on Wednesday, the highest number since 1965.

Another interesting note is that the market topped out Oct. 9, 2007. and the bear-market low in 2000 was also on Oct. 9. I don't know if that means anything, but it sure is an interesting coincidence.

On the sentiment front, the American Association of Individual Investors Index is showing the second-highest reading of bears in history, with about 60% of individual investors expecting stock prices to continue to fall. And assets in the Rydex Bull Fund now only account for 15% of bull and bear fund assets, which is the lowest since 2003, according to SentimenTrader.com.

Depending on how the market closes today, I may start to look for some long-side opportunities in the indices I have highlighted below. The key will be for a big down opening this morning, and then we close higher at the end of the day. If not today, then Monday. If that doesn't happen, we will re-evaluate the situation in my column on Tuesday.

If that happens, it may be a good time to start small positions in these areas with protective sell stops directly beneath those lows. That way, if the selloff continues, losses would be very minimal. Again, it is important that you start with a small percentage of your capital and add to positions only after we get some confirmation that turn is for real and a follow-through day on the indices appears. If you do anything, USE PROTECTIVE STOPS ON ALL POSITIONS! And keep them small at first.

I've drawn a red box on that charts representing overhead resistance that would likely prompt me to take some profits if the indices hit those areas. The key is to remain cautious and remember that I have seen no signs that this primary downtrend is even close to ending. However, major waterfall selloffs like we've had often result in significant bear-market rallies. That may not happen until the financial markets stabilize, but this may be a good time to prepare to take positions if they do.

QQQQ

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Source: TC2000

MDY

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Source: TC2000

IWM

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Source: TC2000

MOO

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Source: TC2000

GLD

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Source: TC2000