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Why Cramer is confident about rally

The Dow and S&P 500 hit fresh highs on Thursday, prompting some stock market observers to question the move, but Jim Cramer told CNBC the rally is sustainable.

"A lot of people say it's a bubble. A lot of people say it's a short squeeze. I say when the transports do well and the industrials follow through, that's historically been a sign that maybe you're on more solid footing than you think," Cramer said on "Squawk on the Street."

Read More30% falloff looming for S&P 500: Economist

Cramer was referring to Dow theory, which says when one average follows another average's direction, the move is indicative of a trend in the market overall. In this case, both the industrial and transportation averages have pushed higher, suggesting the broader market will climb, too.

"I believe in Dow theory. I'm sorry. I'm old fashioned," Cramer said. "Some people, including me, like to see these things move in tandem. Makes me feel like, you know, commerce is getting better and it's not just one giagantic short squeeze."

—By CNBC's Drew Sandholm

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