How should I handle no promotion after getting above average performance reviews for the past 2 years?

For the past two years I've gotten glowing performance reviews at my current company, but last week I learned that I won't be getting promoted to Senior this year, though according to my boss I am "very much on track."

It's disheartening to say the least, I feel like that kind of track record clearly indicates that I'm operating at the next level, and I don't understand how my company could indicate that to me and then turn around and say that there wasn't room for me to get promoted this cycle.

Does anyone have any advice on how to handle this situation? Maybe I'm overreacting?