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The Nikkei 225 Hits the Brakes

by Sentimentrader
2026-03-05
The Nikkei 225 slumped over 7.5% after a 252-day high with market breadth collapsing sharply. Historical data signals mixed short-term returns but a favorable long-term risk-reward profile post extreme breadth drops.

Key Points:

  • The Nikkei 225 Index plummeted by more than -7.5% in the short term after hitting a new all-time high.
  • Its short-term market breadth also experienced a sharp and rapid decline.
  • Historical data offers partial insights, indicating that the outlook is not uniformly optimistic.

Turmoil Deals a Blow to Market Fervor

The recent complex international market environment has directly impacted Japan's stock market. After setting a new high over 252 trading days, the Nikkei 225 Index saw its maximum 3-day drop exceed -7.5% within a single month.

Market Performance in Similar Scenarios

This type of scenario is rare when examining historical data. Since 2000, this signal has been triggered only 5 times, including the current episode.Related Backtest Click Here.

In such extreme cases, the market posted an average return of -0.7% one month later, with only a 25% probability of positive performance. As we have consistently noted, signals o

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