GE Sets Up for Long Term

Regular readers of this column know that a main thesis of mine is that consolidation after a strong trend is usually followed by a breakout and continuation of that same trend.

It's this thinking that leads me to believe the current multiyear consolidation we've seen on the Dow will lead to an eventual upward breakout and move to all-time highs.

In fact, I had been searching steadily for historic charts to back that assumption when I stumbled upon a clear example where that thinking proved incorrect.

Notice in the first chart below the Dow started going sideways after its strong run in the late '90s. In fact, it made no headway up or down until it broke hard in March '01, rallied, and then slid until the post-9/11 bottom.

Of course, times are different now, but the two Dow charts below are similar.

As you can see in the second chart below, the Dow is coming off another +40% run from '03 and has been going sideways for about two years. So, while I maintain the next move will be up, history has shown there's a precedent for a move down.

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The net of all this chart reading? I remain bullish, but in true turncoat fashion, am willing to switch sides as soon as it's clear which way the wind is blowing. Just wanted you to have a heads up that if we see a big selloff, well, it shouldn't come as a surprise.

Today, charts for the Nasdaq, General Electric (GE - commentary - Cramer's Take), Symantec (SYMC - commentary - Cramer's Take), Omnivision Technologies (OVTI - commentary - Cramer's Take), Harrah's Entertainment (HET - commentary - Cramer's Take) and Boyd Gaming (BYD - 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 Bryn Mawr, Pa., where I think colleges should net out what Parents' Weekend is really about: Buy your kid dinner on arrival day; lunch the next day and then leave them some spending money as you make a hasty departure!

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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 appreciates your feedback; click here to send him an email.