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This is the chart traders are fixated on right now

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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.

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The question now is whether this delicate dance between the index and its smoothing mechanism can continue—or if the music is about to stop.

"It's all about the close," advises Rich Ilczyszyn of iiTrader. "Bears want a close below the 100-day, which then opens the door to a 5 percent or more correction down to 1,888 in the S&P e-mini futures."

Some traders say it will be much worse than that.

"Buying dips in the S&P has worked like a dream for three years. But like a lot of trading strategies, it works until it doesn't," said Scott Nations of NationsShares. "Buying a bounce off the 100-day moving average is one of those strategies. When it finally quits working—and that's likely to be soon—it's going to be ugly."

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"The day that the euphoria is broken, the market will have a violent, shattering move downward," agreed Jeff Kilburg of KKM Financial.

Of course, others remain bullish.

"I do believe that buying the 100-day moving average might work again here," wrote Brian Stutland of Equity Armor Investments. "Interestingly, the market made a new low as it hit the 100-day moving average, but the VIX did not make a new relative high, meaning traders were likely selling out their fear or protections. Usually this is a buy signal, as expectations for a rally brew."

Either way, the S&P's dance with its 100-day moving average seems to merit close watching right now.

"This is more important than all this Ukraine noise and everything else," Block said. "The price action is going to tell us something—albeit on anemic, August 2014 volume."


—By CNBC's Alex Rosenberg.

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