New highs for A-D lines bode well for NDX

The NASDAQ (NDX) advance-decline (A-D) and volume A-D lines reached new highs yesterday. New highs for price and volume breadth suggest both participation and accumulation, which is a positive signal and bullish leading indicator for new highs above the late October high of 26,182 on the NDX.

Chart 1: NASDAQ 100 (top) and the NASDAQ 100 advance-decline line (bottom)

Chart 2: NASDAQ 100 (top) and the NASDAQ 100 volume advance-decline line (bottom)

A developing bullish cup and handle on the NDX

Similar to the S&P 500 (SPX), the NDX could be forming a tactical cup and handle. Holding above or near the 23,358-25,200 area (improving 13-, 26-, and 40-day moving averages and chart levels) would bode well for the developing handle, increasing the potential for the NDX to follow the bullish breadth signals highlighted above and confirm this bullish pattern. A decisive push above the November 4 downside gap at 25.762-25,888 is the signal that would confirm the cup and handle and favor upside beyond the late October high of 26,182 toward an upside count near 27,600.

If needed, the early November low near 24,600 offers an additional support ahead of the late November low at 23,854.

Chart 3: NASDAQ 100 (NDX): Daily chart