NEW YORK (TheStreet) -- On Wednesday, the U.S. stock market finally saw a bit of selling pressure from the extreme overbought index that is the Nasdaq. As I have been mentioning, I was looking for the Nasdaq selloff. The overbought condition was simply not sustainable.
The DJIA was the only index to finish in the green on Wednesday as it closed up 10.72 points at 17078. The S&P 500 was lower by 1.56 at 2000.72. The Nasdaq was down 25.62 to close at 4572.56 and the Russell 2000 was down 7.27 at 1172.20.
The S&P 500 is now the only index that is still in overbought territory. That will change either Thursday or Friday.
Read More: 10 Stocks Carl Icahn Loves in 2014The S&P 500 Trust Series ETF (SPY) volume was once again anemic, coming in at just over 57 million shares traded. That was 15 million shares lower than Tuesday's volume and Tuesday volume was down 32% versus its year to date average. You get the picture. The markets are probably waiting for the European Central Bank announcement on Thursday and hope that Mario Draghi provides some market floor again. If not, there could very well be some serious selling pressure. Traders, you need to take notice what is going on here. My algorithm process is head of the curve, so to speak. The timing may be slightly off as the computer-programmed hedge fund machines try to extend the bubble as high as possible. But the fact remains, extreme overbought signals will launch a selling frenzy. As I have been writing , the overbought conditions are simply not sustainable for any length of time. You need to be on the correct side of the risk/reward in this stock market. Over the past few days I was not receiving any oversold stocks on my small- and large-cap scans. When that happens, which is rare, you step aside and let the momentum players think they know what is going on. All my positions have been on the short side or inverse index exchange-traded funds that take advantage of a market that has signaled extreme overbought. This process is unlike any other that traders use. At the present time, there are still no small- or large-cap stocks on my algorithm scan to buy, even after the selloff on Wednesday. I continue to hold my current short positions. Read More: How Samsung Is Trying to Take the Press From Apple On Thursday, I sold my ProShares UltraPro Short (SQQQ) for a very nice 2% gain. I still hold my Direxion Small Cap Bear 3x (TZA) . I also shorted Hormel Foods (HRL) and TeleNav (TNA) both with extraordinarily overbought algo numbers. At the time of publication, the author was long TZA and short HRL and TNAV, although positions may change at any time. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.