The three most important charts for the market now as volatility rocks Wall Street

With volatility rocking the market again, investors are searching for signs as to where stocks could go next. One chart-minded analyst says three charts may hold some clues.

Signs of a bottom

According to Mark Newton, founder and president of Newton Advisors, the S&P 500 is starting to show signs of a bottom.

Specifically, he pointed to the fact that the S&P 500 is managing to trade above its 200-day moving average, while nearing its 50-day moving average. Newton calls this price action constructive on a technical basis.

"Right now, we obviously have started to show more and more signs of bottoming out in the last couple of weeks, so that is very constructive. We've also exceeded the trend line just since the middle part of March, so those are two key positives with regards to short-term trends," Newton said Friday.

Tech bounces back

The technology sector, though it fell under pressure in recent weeks on the heels of Facebook's major privacy scandal, is still the best-performing sector this year. Newton pointed out that technology has recently started to outperform the broader S&P 500, and with the sector's large weighting in the market, this is one important development to monitor.

"Despite the pullback that we've seen since the middle part of March, tech is still very much constructive going back over the last year. So we pulled back almost exactly to where we needed to, to see tech bottom out," he said on Friday.

The rate debate

The benchmark 10-year Treasury yield on Monday hit its highest level in a little over three weeks, touching 2.865 percent.

The 10-year yield's level to watch was previously 2.81 percent, Newton said, which according to his chart work, could rise as high as 2.95 to 3 percent.

"Now we see what I think is the global bond sell-off starting to re-emerge," Newton said on Friday, adding that this would imply that rate-sensitive groups such as utilities and REITs are unattractive.

Ultimately, Newton said stocks and yields could certainly rise in tandem and that rising rates wouldn't necessarily place equities in danger.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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