Sure, in and of themselves, the

Nasdaq's

53-point gain yesterday and 42-point gain today don't amount to much. But the sum of the parts can mean a little more than the individual totals, and that appears to be the case this time.

The Nasdaq finished up the aforementioned 42.27 points, which was 1.1%, at 4053.28.

TheStreet.com Internet Sector

index climbed 11.27, or 1.4%, to 802.21. The ability of the Nasdaq to hold above both the 4000 level and above its 200-day moving average (which came in around 3963 today, and was around 3968 as of the close today), has encouraged buying, though light volume continues to be a factor. Many analysts expect the quiet, but positive, trade to persist into the Labor Day weekend next week.

One daytrader we spoke to said he was looking to play the seasonal factors and was buying stock right now. The trader said the market typically bottoms in August, then makes its highs toward the end of the year, and he was buying now in anticipation of a rally heading into September. But in the same breath, the trader said that he would be quick to get out of positions when it appears as though the herd mentality starts to get in. His clue, he said, would be when the market gaps open in the morning for a few sessions.

In addition to positive seasonalities, he said that the market tends to do well during an election year, and there is little threat today from the

Federal Reserve

on raising interest rates. The question, he said, is how much the market already has priced in all of these positive factors and whether traders will attempt to sell into a large rally.

"Anyone from institutional investors to hedge funds are aware of these factors," he said. "And the market tends to move in the direction that inflicts the most pain, so this could be the year that fading the end-of-the-year rally is the more profitable strategy."

The trader said he was first targeting the 4289 high from July, then 4500, which would likely cap an up move. As far as what he was buying, the trader said there were a few factors he was considering. First, he said, he is investing in hot sectors like fiber optics, wireless and, to some extent, computer chips.

Second, the trader said he is looking at what the favorite stocks are among the best-performing mutual funds. Individual investors tend to throw their money at the funds that are the top performers, and those funds in turn buy more of their favorite stocks.

Stocks that fall into this category include

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

,

Oracle

(ORCL) - Get Oracle Corporation Report

,

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

,

Check Point Software

(CHKP) - Get Check Point Software Technologies Ltd. Report

,

PMC Sierra

(PMCS)

,

Applied Micro Circuits

(AMCC)

,

VeriSign

(VRSN) - Get VeriSign, Inc. Report

,

Juniper Networks

(JNPR) - Get Juniper Networks, Inc. (JNPR) Report

,

Ariba

(ARBA)

and

i2 Technologies

(ITWO)

, among others.

Third, he looks for some of the secondary stocks in a particular sector. For instance, he said, if

DoubleClick

(DCLK)

, the leader in online advertising, begins to move, he looks at second- or third-tier stocks in the same area, such as

Engage

(ENGA)

or

24/7 Media

(TFSM)

, and will buy them if they have not already rallied.

Finally, he said that tried and true traditional Internet plays like

Yahoo!

(YHOO)

,

Amazon

(AMZN) - Get Amazon.com, Inc. Report

, DoubleClick and

eBay

(EBAY) - Get eBay Inc. Report

typically perform well into the fourth quarter.

Those traditional Internet plays performed well today, in part due to positive comments from

Merrill Lynch

analyst

Henry Blodget. The gabby Internet expert said sentiment appeared to be improving among leading consumer Internet stocks and singled out Yahoo!, DoubleClick, eBay, Amazon.com,

America Online

(AOL)

and

Homestore.com

(HOMS)

. Merrill has done underwriting for AOL, Homestore.com and DoubleClick. (See

Jim Cramer's

recent

piece on DoubleClick.)

Of those, Homestore.com benefited the most, closing up 5 5/8, or 14%, to 46 11/16. DoubleClick closed up 2 3/4, or 7%, at 40 5/8; Yahoo! rose 6, or 4.5%, at 139 13/16; eBay added 3 9/16, or 6%, to 61 3/16; AOL finished up 1 1/4, or 2%, to 60; and Amazon.com climbed 9/16, or 1.5%, to 39 3/8.

On the other end of the spectrum,

Next Level Communications

(NXTV)

closed down 49 13/16, or 54%, at 41 3/4 after the maker of high-speed communications equipment was

downgraded by

Lehman Brothers

to neutral from buy.

2:24 p.m.: Nasdaq Inches Up; DOT Treads Water

Yesterday's close above 4000 in the

Nasdaq

was seen as a positive development, and that level could serve as a floor for now, though the market has yet to run too far from that psychologically key level.

In recent trading, the Nasdaq was up 16.4, or 0.41%, at 4027.42.

TheStreet.com Internet Sector

index was flat. While the Nasdaq has been making baby steps higher of late, there's no denying that the progress has left it in a pretty positive position. Even though the market is in a traditionally slow period and lacking positive catalysts, the July high of 4289 is certainly within reach.

Over at our

RealMoney.com

TheStreet Recommends

sister site, technical analyst

Helene Meisler

was looking at something called the

Investor's Intelligence Bullish Percentage

. Technicians often look at sentiment indicators as contrary indicators, the theory being that the general public is generally wrong when it comes to understanding market direction.

Meisler notes that Wednesday's reading in the Investor's Intelligence Bullish percentage came in at 43.5% bulls and 33.7% bears. She points out that while neither one of these numbers is "bell-ringing," they have moved in a direction that says sentiment is getting a little too bearish and if they shift in that direction any further, they will be the sort of numbers that are bell-ringing. Why bell-ringing? Because the percentage of bulls is at its lowest level since November 1999 and the percentage of those looking for a correction also is the highest it's been since that period.

"Because these are contrary indicators, they tell us we're closer to a low than a high," she writes.

Among stocks on the move, the disaster of the day has been

Next Level Communications

(NXTV)

, down 49 5/8, or 54.2%, at 41 15/16 after being

downgraded by

Lehman Brothers

. The downgrade to neutral from buy was made by Lehman analyst Steven Levy, who indicated he was concerned that Next Level's revenue will plunge in the wake of the

Qwest

(Q)

takeover of

U.S. West

. U.S. West has been Next Level's major customer.

But the downgrade had some impact in unexpected places. Shares of

Nextel

(NXTL)

and

Nextlink

(NXLK)

both dropped early today merely because they shared a name similar to Next Level's. Nextel, which traded as low as 53 3/4, was recently 53 7/16, while Nextlink was at 37 7/8 after trading as low as 36 1/16.

11:07 a.m.: Nasdaq Continues to Make Slow, Upward Move

Slow, but steady progress has marked the latest rally in the technology sector.

In recent trading, the

Nasdaq

was up just 1.4, or 0.03%, to 4012.4.

TheStreet.com Internet Sector

index was off 5.22, or 0.66%, to 785.72.

Technical factors are mostly positive for the Nasdaq. In addition to closing above the 4000 level yesterday, the tech-heavy index also closed above its widely watched 200-day moving average for the first time since July 26. In his morning commentary, Jeffrey deGraaf, senior technical analyst with

Lehman Brothers

suggests cautious optimism regarding the upside.

"Just how influential and convincing was Wednesday's action?" he asked. "While volume was heavy, it was not dramatically strong. The best figures we are seeing in the momentum data are the ratios of up to down volume. It has consistently been running near 2/1, whereas breadth figures

winners vs. losers have been even (1/1). In our eyes this doesn¿t imply a run-away market, but suggests that there are still idle resources willing to commit to this market (hence this drift higher).

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

over 70 would go a long way in confirming this strength and building our confidence in the durability of this market. Our call for seasonal weakness stands, but we need to respect the action of the markets here. We are choosing our battles carefully."

For the record, Cisco was trading around 67 today.

We thought we had heard the last of Henry Blodget (at least for a little while) on

Tuesday , when he made a call regarding online advertising for the third quarter. But "

Oh Henry" was back out there today plugging positive performance among "leading consumer Internet stocks."

He wrote: "Over the last few weeks, some potentially bad news has hit the market, but has not driven the stocks down further (for example,

Amazon

(AMZN) - Get Amazon.com, Inc. Report

missed consensus revenue, an Amazon partner company went belly up, and we said we believe there may not be as much upside to

Yahoo!'s

(YHOO)

revenue in Q3 as in the past). Minor good news, on the other hand, has lifted the stocks. We believe, therefore, that sentiment toward the group is improving."

And just in case anyone has missed any of his recent notes and starts to think that Blodget is all gung-ho on the sector, he throws in his now standard qualifier.

"As stated previously, we believe the fundamental performance of the leaders in Q3 will be solid but not spectacular: the industry is still transitioning from hyper-growth to growth, and the online advertising sector is still feeling the effects of the dotcom shakeout. In Q4, we believe fundamentals will be stronger. As we move into Q4, therefore, we expect that the combination of improving sentiment and fundamentals should help drive the stocks."

Blodget adds his recommendations for the consumer sector:

America Online

(AOL)

Yahoo!, Amazon.com,

DoubleClick

(DCLK)

,

eBay

(EBAY) - Get eBay Inc. Report

and

Homestore.com

(HOMS)

. While it's not much of a reach for an Internet analyst to recommend industry heavyweights like AOL, Amazon, Yahoo! and eBay, it should be pointed out that Merrill has done underwriting for both DoubleClick and Homestore.com in addition to AOL. Of the above-mentioned stocks, Blodget says he expects AOL and Homestore.com to have the strongest earnings performance compared to expectations in the third quarter.

Merrill Lynch's Ed McCabe was talking up

FreeMarkets

(FMKT)

. Merrill has not done underwriting for FreeMarkets. After a meeting with management, McCabe indicated he is comfortable the business is on track. FreeMarkets runs online auctions for industrial supplies.

"Although we are not expecting a `blowout' the magnitude of last quarter, we are comfortable that there is meaningful upside to our Q3 estimates of $22.9mm in revenue and ($0.42) in cash EPS," he wrote. Perhaps more importantly, McCabe points out that an insider trading period that for many companies takes place soon after earnings are released, will close at the end of this week -- and any pressure on the stock as a result of the open window would subside.

Shares of

Akamai Technologies

(AKAM) - Get Akamai Technologies, Inc. Report

were down 6.4%. The stock is being hurt by yesterday's news that rival

Inktomi

(INKT)

had formed an alliance with AOL and privately held

Adero

that would target the content distribution business where Akamai is the leader.

Finally, shares of

RealNetworks

(RNWK) - Get RealNetworks, Inc. Report

were down 5.6%. The streaming media company was featured in

Fortune

in an article titled "Is Rob Glaser For Real?" Glaser is the CEO of RealNetworks. While the article appears to be relatively balanced,

W.R. Hambrecht

analyst Bill Lennan questioned a number of points from the piece.

"In particular, we do not believe that 'peer-to-peer' file sharing schemes like

Napster

and

Gnutella

will render RNWK 'a virtual dinosaur.' More importantly, we believe that in making that assertion, Fortune revealed a limited understanding of RNWK. We also note a significant inconsistency in the article's MP3 and DivX discussions. Moreover, we believe Fortune erred in claiming that "only one" digital music player uses RNWK's format."