As for the BKX train, after a 30% gain, what's the next stop? For answers let's go back and take a look at the TOPIX Japan Banks Index from the early 1990s, a time when Japan was dealing with their own banking and credit tragedy.

From 1989 to 1991, after forming a peak that was nearly identical to the recent BKX peak, the TOPIX Banks Index fell from a high of 1477 down to 554 on a closing basis, a 38.2% retracement of the entire bull market move. What happened after that retracement level was reached? The TOPIX Banks Index proceeded to rally nearly 80% over the course of the next 14 months.

By July 15 this year, the BKX had plunged to 48.47 on a closing basis, virtually the same retracement the TOPIX saw. A similar rally over the next 14 months would take us to the low 80s on the BKX. Sure, but what about September?

I asked my friend, Minyanville contributor Jason Goepfert of Sentimentrader.com, what September typically feels like for the BKX. "It's been pretty mixed to slightly negative," he warned. "Using the BKX Index since '94, it's been up during Sept. 7 out of 14 times, but shows an average return of -0.8%. Its maximum intra-month gain has averaged +4.2% while the maximum intra-month loss has averaged -5.4%."

Clearly, there's a trade here. But there is more to this story, and we have much to learn much from the Ancient Greeks in this instance; namely, how to capitalize on economic doom and tragedy.

After that 80% gain, with the TOPIX back at 962, over the course of the next 10 years that index proceeded to fully collapse, eventually falling as low as 124. Now that's a financial tragedy.

The Greeks were experts at dealing with this kind of thing, and people paid good money to watch as oracular prophets made weird, dire predictions that usually came true. Looking back at the ancients from our economic perch today, this enterprise of staging truth-telling performances in exchange for money seems almost quaint.

If I had any measure of good judgment, I would stop right now. Being "right" about economic doom is the quickest way to lose all of your friends and create more enemies than you can shake a stick at. It's a bit like telling a man his wife is cheating on him... with his son. If you are lucky, you will merely be hated; unlucky, and you will be stoned to death by someone who will then scratch his own eyes out. But I have never been accused of having a good judgment.

A decline in the BKX of the magnitude the TOPIX saw over 10 years would see that index eventually fall to 10 or 11. Of course, at that point, such a decline would be the least of our worries. More likely, the bottom will form around the mid 20s... With many, many trades in between.