Perhaps this capability of the AIM-9X
en.m.wikipedia.org
Utilizing the JHMCS, a pilot can point the AIM-9X missile's seeker and "lock on" by simply looking at a target, thereby increasing air combat effectiveness
No. That permits off-axis shooting. The earlier versions you had to have your target in front of you (think of all the Hollywood movies where the pilot is maneuvering to get his target in front and get tone (in the old, old days the seeker was simply 4 IR sensors that the missile would try to keep balanced. There was audio feedback as to that balance.))--the X version the pilot can merely get the target in front of his helmet, there can be a substantial deviation between where he's looking and where the plane is going. It doesn't change the fundamental fact that the Sidewinder is a heat seeker and goes after hot things--which is why if you've got one on your ass you spew out flares (hot things to try to distract it) and try to turn so as to deny it a view of your engines (hiding the hottest part of your plane.) All I can think of is there was some operating piece of electronics that was warm enough for the seeker to find it against the cold of the stratosphere.
As I understand it, the head-up target overlay is used to "mark" the target so that the missile can identify it by means other than heat signature. In the case of a balloon, the heat signature would not be much of a factor, but maybe the missile is now supplemented with radar, lidar, or visual imaging capability. My guess would be
lidar. If so, the Chinese might have picked up valuable intelligence on such a targeting device that would be helpful in developing countermeasures. (Note that the authors of the lidar link are all Chinese, indicating an intense interest in the subject on their part.)