When the market is described as “overbought,” it generally means that asset prices have risen to a point where they exceed what is considered their intrinsic value. This often happens after a prolonged period of bullish activity, where investor enthusiasm drives prices up. In an overbought market, the demand for assets is disproportionately high compared to their actual worth, making them expensive.
Being “overbought” doesn’t necessarily mean a crash is imminent; it’s more like a yellow light signaling caution. Investors might take this as a sign to reassess their portfolios, consider taking profits, or avoid entering new positions until the market corrects itself.
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