I follow a number of sentiment indicators. Most of these are used as contrarian indicators and most indicate that the public is bearish on stocks. They are not difinitive though; I would rather see more extreme readings:
Ideally this indicator would have the bulls down in the low 20s where it was at the January low, but this is a bullish reading from a contrarian standpoint.
NYSE public short sales versus specialists and member firms:
Both of these numbers indicate that the public has a much greater affinity for short selling than the NYSE members or specialists. The members and specialists are the smart money so this indicates they are more bullish than the public. That is a positive for the market.
Short interest on the NYSE was 14.4 billion shares in mid February which I believe is a record. That is bullish as shares sold short are future demand.
There are two put/call ratios, one for indices and one for individual stocks. When the index ratio is over 1.5 it is bullish; when the individual stock ratio is over 1 it is bullish. Both are above those numbers right now; the index ratio is 1.78 and the individual is 1.11. These numbers are very volatile but both have been trending higher recently.
The volatility index is another indicator I use to judge sentiment. This indicator measures the implied volatility of short term index puts and calls. To put that in simpler terms, if the index is rising, investors are paying more for options because they expect more volatility. If it is falling they are paying less for the options and therefore expect less volatility. What we are looking for with this indicator are extremes. Here's a chart of recent prices:
As you can see, the general trend for the last year is up. What we are interested in here though are the spikes. The spike in August corresponds with the low in the stock market on 8/17. The spike in November corresponds with a short term bottom on 11/27. The spike in January corresponds with the low of 1/22. I would call this indicator neutral at this point. It is near the high end of the range if you take out the spikes, but to really be bullish we need a spike into at least the 30s and preferably the high 30s.
Overall, I find the sentiment is on the bullish side right now. Not extremely so, but certainly bullish. We may need to revisit the January lows to get really extreme readings in any of these indicators.