When trading gets tough, investing professionals tend to turn to the charts for guidance. And with tender geopolitical situations cropping up around the world, European economies in question and stocks getting closer to "correction" territory, many say the S&P 500's 100-day moving average is beginning to take on an outsized importance.
Known as a "smoothing mechanism," the 100-day moving average takes the average closing price from the prior 100 trading days, and thus provides an overall idea of the market's trend. The fact that the average takes into account precisely the prior 100 trading days (rather than 95 or 105, say) makes the exact level of the indicator somewhat random.
However, since 100-day moving averages are widely watched on Wall Street, the level that the S&P 500's moving average happens to be sitting on can begin to matter big time.
In fact, many traders point out that on Wednesday morning, the S&P 500 bottomed just 2 points (or 0.1 percent) away from its 100-day moving average, which comes in at 1,913.25. For chart watchers, this is a very good sign.
"We bounced right off the 100[-day moving average], and that's encouraging," Rhino Trading Partners' chief strategist, Michael Block, told CNBC.com. "If we broke it, that would be a concern. But we're right on that level, so let's see what happens."
Over the past year, buying the S&P whenever it has gotten down to its 100-day moving average has made for some terrific trades. Going back to June 2013, the S&P has touched its 100-day moving average six times—and each time, it has bounced back like clockwork.