After the Nikkei 225 slid  7.6% over the past four daystaking it below its 50-day moving average along the wayJapans main stock index could stand at a decisive level, according to technical analysts.

As we head into the last couple days of July, the action may very well may define the medium-term direction of the Japanese market, Jonathan Krinsky, chief technical analyst at Miller Tabak, wrote in a note out Monday afternoon. If the bull market is still healthy, the correction should hold at current levels. If not, then any bullish thesis will likely be put on the back burner for now.

Japanese ETFs such as the iShares MSCI Japan ETF /quotes/zigman/260387 /quotes/nls/ewj EWJ and WisdomTree Japan Hedged Equity Fund /quotes/zigman/1496633 /quotes/nls/dxj DXJ have slumped along with the Nikkei /quotes/zigman/5986735 JP:NIK. leaving them up 14% and 21% in 2013 to date. If youre looking at EWJ and DXJ, keep in mind the tradeoffs for hedged ETFs that invest in Japan.

To put some numbers to the latest Japanese sell-off, Krinsky says of the Nikkei: A break of 13,660 implies near-term downside risk to the 13,200 level, with a possibility of a full retracement back to the June lows around 12,400. The index fell hard in late May through early June before recovering, as shown in the chart above.

MacNeil Curry, head of global technical strategy at Bank of America Merrill Lynch, is another chart watcher who views the Nikkei as on an edge. He said its near a significant breakdown and resumption of its larger bear trend .

The Nikkei remains up 31% in 2013 to date, but its 13% off its May 22 high. Later this evening, investors will take in reports on Japanese unemployment and industrial production that might help the Nikkei. Theyre expected at 7:30 p.m.  Eastern and 7:50 p.m. respectively. Economists predict a jobless rate of 4% and a 1.5% decline in industrial production after a 1.9% gain in May, according to FactSet.

The Nikkeis 2013 gain has mostly been attributed to Abenomics, which a recent Wall Street Journal article described as a high-stakes gamble to escape a cycle of paltry growth and falling prices using a combination of government spending, easy money and an ambitious overhaul of Japans hidebound economy.

Victor Reklaitis

Follow Vic on Twitter @vicrek

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