A solid earnings report from Internet giant Yahoo! enabled the Nasdaq Composite to snap back above its 50-day MA, pulling the rest of the broad market with it. After gapping firmly higher on yesterday's open, stocks trended steadily higher throughout the rest of the session before closing at their intraday highs. The Nasdaq Composite zoomed to a 1.4% gain, while the small-cap Russell 2000 tailed closely behind with a 1.1% advance. The S&P 500 rallied 0.9%, the Dow Jones Industrial Average 0.7%, and the S&P Midcap 400 1.0%. Both the Dow and S&P Midcap indices finished at fresh all-time highs, while the S&P 500 closed at a new six-year high.

Total volume in the NYSE declined by 5%, but volume in the Nasdaq was 8% higher than the previous day's level. After two days of higher volume selling last week and three within the past four weeks, yesterday's "accumulation day" was a welcome change for the Nasdaq. Strong market internals confirmed the bullishness. Advancing volume in the Nasdaq exceeded declining volume by a ratio of 5 to 1, while the NYSE was positive by a margin of 3 to 1.

An impressive reaction to Yahoo!'s earnings report enabled the Internet Index ($GIN) to recover back above its 50-day MA that it traded below in each of the past five days. It also closed right at resistance of its daily downtrend line that has been in place since the high of December 15. If the $GIN rallies and closes above yesterday's high, it will have broken out above convergence of its 50-MA and downtrend line:

After two closing below it in the prior two days, the Nasdaq Composite rallied to finish above its 50-MA again. However, it closed just shy of resistance of its prior high at the 2,470 level. The horizontal line on the daily chart below illustrates this resistance:

We expect a test of the 2,470 resistance level in the coming days. If the index pops back above it, the Nasdaq could easily follow the S&P in rallying to a new six-year high. Support will be found at yesterday's low, which is in the vicinity of the 50-day MA.

Since the beginning of the year, the market has been rather indecisive. Just as it appears that many of the major indices are going to roll over, one of the indices suddenly rallies above resistance. Then, after the index breaks out, thinking the selling is finished, the weakness sets in again. This, of course, is the classic behavior of a sideways, range-bound market. Trying to predict the market's next move will likely result in the costly proposition of churning your account. While yesterday's action certainly makes an argument for the bullish side of the market, this is not the time to be overly aggressive with the quantity and share size of your positions. Take it easy until earnings season is finished. Trends should start to become more clear when the corporate report cards are behind us.

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Deron Wagner is the head trader of Morpheus Capital Hedge Fund and founder of Morpheus Trading Group (morpheustrading.com), which he launched in 2001. Wagner appears on his best-selling video, Sector Trading Strategies (Marketplace Books, June 2002), and is co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. He is also a frequent guest speaker at various trading and financial conferences around the world. For a free trial to the full version of The Wagner Daily or to learn about Deron's other services, visit morpheustrading.com or send an e-mail to deron@morpheustrading.com .