Face Consolidation With Short-Term Trading

I received a few emails based on yesterday's column -- " Party Like It's 1999 -- in 2016?," which took a historical look at the Dow's cycles -- but none of the emails was more to the point than the one I received from GTC:

Thanks for depressing me today! Lol

I wanted to let you know I looked back and checked the S&P 500 from the bottom 1974 to 1982 and, granted we were in the 16-year consolidation, we did double from the bottom in eight years.

GTC brings up a very good point. Yes, based on achieving an absolute high, the market went nowhere for a very long time. However -- and this is the key -- as long as the amplitudes have enough movement, even an 18-year span will have a lot of trading opportunities.

As an example, you can see below there were at least five trending markets during that time period. Of course, there were also periods during which folks must have pulled their hair out, as I illustrate with the rectangle.

Naturally, though, there is a caveat. I used a monthly time frame, which necessitates longer trends for traders. If your method requires a trend that lasts only days or weeks, your trading opportunities multiply exponentially.

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All of which makes another 12 years of sideways movement a great argument to adopt a short-term trading approach. Up or down, traders of that ilk can always find ways to make money. It's the long-term buy-and-holders who will generally struggle.

Today, the Nasdaq Composite Index, palmOne (PLMO - commentary - Cramer's Take), Education Management (EDMC - commentary - Cramer's Take), LCA-Vision (LCAV - commentary - Cramer's Take), Merit Medical Systems (MMSI - commentary - Cramer's Take) and Deckers Outdoor (DECK - commentary - Cramer's Take).

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Charts produced by TC2000, which is a registered trademark of Worden Brothers Inc.

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And that is the final word from blogger.com, where just as I suspected, nearly 75% of you have totally ignored the "blog phenomenon," according to the poll I conducted in my column yesterday. On the other hand, 25% of you are regular readers, which I did find surprising. I thought it'd be more like 1%! Also, I won't have a column Friday, but will be back in action Monday morning.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Merit Medical Systems and Deckers Outdoor to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes a daily technical analysis column for RealMoney.com and also produces a daily premium product for TheStreet.com called The Chartman's Top Stocks -- click here for a free two-week trial. While Gary cannot provide investment advice or recommendations, he invites you to send your feedback.