Does it heat up when it's idling?
Are you running underdrive pulleys? The stock setup runs the pump 29% faster than the crank... the March underdrive pulleys will run it 10% slower than stock. If you put the stock water pulley back on (keeping the underdrive crank), it'll run about 6% faster than the crank. If it's still a problem, you can get an overdrive waterpump pulley for a 93 cobra, and it'll bring it back up the the 29%.
A
www.stewartcomponents.com water pump is highly recommended (unless you already have an edlebrock pump).
My guess is a blown head gasket (it probably overheated). Now, once it heats up, the steam lifts the head up, and you loose compression.
Are you loosing any coolant? Is there any in the exhaust? Residue around the headbolts?
You could pick up a code scanner from Walmart (about $25), and run a cylinder balance test. If one of them is leaking, it'll show up weak.
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'89.5 5L LX, hatch, Medium Canyon Red, 155K Km (No winters), 5sp, 3.08, GT interior, a/c, Alpine CD, K/N, Crane PS91, Walbro 190 LPH, March Pulleys, Mr. Gasket 180 therm (HP balanced), 3 core rad, MarkVIII fan, Variflow controller, Polygraphite front bushings, FMS-5300B springs, 6 KYB's, 73mm Calipers, Maximum Motorsport 4pt chassis brace, Western Motorsport Racing's Sub-frame connectors. Re-ringed bottom end, conv. motor mounts, melling oil pump, FMS-C50 waterpump, GT40P heads (blended, polli