Under the overbought market, index or stock we understand the condition when following a phase where the market has seen prices increase which coincides with a big Bullish Volume surge or big Bullish Volume Accumulation we start to see decrease in the volume accumulation.

In general big Bullish Volume indicates that a large number of high-priced shares are being transferred (i.e., distributed) from one group of market participants to another. Following the surge, which uses up a lot of buying power, the number of those buyers willing to keep buying at these high (-inflated) prices becomes exhausted and the market, index or stock becomes "overbought". Buyers are no longer willing to pay up (i.e., bid up / buy at the ask) - the market has reached a critical point where it is vulnerable to a trend reversal down.

You have to bear in mind that overbought condition does not necessary mean we will see reversal down. It rather indicates that the market (in case of our commentaries) is predisposed to have move down. To confirm a reversal it is recommended monitoring changes in the money flow direction.