Without context, I would understand “You're reading too much into the
situation” to mean (as the dictionary said) “něco si nějak vykládat,
chápat (i mylně)”. In other words, you're (wrongly) imagining that the
situation is more complicated or different than it actually is.
Here's an example in context:
[Post:] I have been on the end of some real bad anti social behaviour from
my neighbours above, it took ages to finally find out that the man and his wife
have dementia, this now makes sense … (…)
[Reply:] I may be reading too much into the
situation but it does seem that this couple need help. It may be worth
contacting your local Adult Social Services and telling them that you are
concerned about the welfare of two neighbours … (alzheimers.org.uk)
Dotyčný se situací příliš zabývá = he's making too much
of the situation. .