Another way to view the small cap horizon is to look at the Russell 2000 ETF and see how it compares to the TZA. iShares Russell 2000 Index IWM ( IWM) is the trading ETF to look at. Unlike the leveraged ETFs, the straight "normal" ETFs are in my opinion, perfectly fine to use as part of a portfolio. I especially think they are wonderful when used as a diversification tool. The weekly chart isn't what I would consider overextended. Not enough to pull the trigger to short it (the same as buying a bear ETF). On the other hand, the daily chart is indicating to me that a pullback in price is now expected. SPY data by YCharts For one more reference point, take a look at the SPDR S&P 500 SPY ( SPY) Standard and Poor's Depository Receipts trust is involved in the financial services industry. Their holdings are comprised of the 500 stocks in the S&P 500 Index. SPDR S&P 500 ETF trades an average of 126 million shares per day with a marketcap of $111 billion. It's 52-week trading range is $107.43 to $148.11. Once again, the weekly chart appears ready to take a pause, and the daily is peering over the cliff looking down at support near $145.50 (or lower). The various index charts and the recently announced Fed's QE3 presents a unique challenge to reconcile the catalysts for market direction. The answer is gaining clarity, even with Bernanke refilling the punch bowl, the economy has become like other addicts wanting a fix; a tolerance is building. Physiologically this is the third shot and more money doesn't fix a problem that doesn't lack liquidity. I am not shorting the SPY yet, because I think there is a stock that offers a better risk vs. reward.