Absolutely true. Without exception, markets overshoot on the upside and downside at the extremes of market sentiment.

I'm a self-admitted amateur in the commodities markets, but I've looked at a lot of stock, ETF and sector fund charts. The one thing they all have in common when there is far, far too much optimism is that the price curve goes parabolic, and often on declining volume.

When that happens, I get out and watch for the short entry. Even if the fundamentals don't point to a collapse, there is almost always a correction/consolidation of parabolic price movements that is good for at least three trading sessions of sharp, violent selling.