Asia markets cool as Hindenburg Omen flashes on SPX, Nikkei, KOSPI
After both the Nikkei and KOSPI hit fresh highs early last week, the regional rally rolled over with four straight sessions of selling.
Yet, the decline hasn’t broken their bullish structure — both indices are still above their 1D EMA-20 Bollinger Bands (1 standard deviation), the orange band that acts as a short-term trend filter.
However, a bigger sign of trouble is flashing: the Hindenburg Omen, now present on the SPX, Nikkei, and KOSPI. Asia’s markets often act as a barometer for global risk appetite, and their current pullback signals fading momentum in the short term.
If the weakness persists, it could weigh on the SPX in the weeks ahead, but if Asia stabilises, it may instead mark a short-term reset before another risk-on phase.
What the Hindenburg Omen means
The Hindenburg Omen is a market-breadth warning that triggers when an index shows an unusual mix of new highs and new lows at the same time while overall momentum turns negative.
In simple terms, it signals that market strength is becoming uneven. Some stocks are still climbing while others quietly break down. This divergence often appears before corrections, rotations, or volatility spikes. It does not guarantee a crash, but it warns that confidence is clustering around fewer names.
This makes sense for the SPX, as it is currently being propped up by AI names & MAG7 stocks.
Traders watch it because it highlights the point where breadth cracks before prices follow. It is not a red light, but an amber one that tells traders to tighten risk and monitor momentum closely.
At the same time, the Bollinger Band Width (BBW) for both NIKKEI and KOSPI is pressing near its upper expansion levels, suggesting that volatility may have peaked for now and could start to compress. This often precedes a sideways or cooling phase before a fresh move begins.
Market outlook
Right now, the signals point to cooling rather than collapse.
- Breadth warnings show thinning participation.
- Structure and support remain intact.
- Volatility appears ready to compress.
If the Nikkei and KOSPI hold above their short-term trend bands, this pullback could evolve into a base before another leg higher. For now, traders should treat this as a consolidation phase within a larger bullish structure and stay alert for confirmation of renewed momentum in the weeks
Author
Zorrays Junaid
Alchemy Markets
Zorrays Junaid has extensive combined experience in the financial markets as a portfolio manager and trading coach. More recently, he is an Analyst with Alchemy Markets, and has contributed to DailyFX and Elliott Wave Forecast in the past.
