I can't turn to the left or the right
I'm too scared to run and I'm too weak to fight
But I don't care
It's all pschobabble rap to me
--Alan Parsons Project
Sentiment measures seek to reflect to extent to which market participants are optimistic (bullish) or pessimistic (bearish). When sentiment indicators reach extremes, they often suggest turning points. For example, if sentiment indicators suggest most market participants are bullish, then perhaps most of the buying has already occured, and supply/lower prices may be around the corner.
There are many measures of sentiment. The prudent market participant usually watches a bunch of these indicators for general trends rather than focusing on a single measure.
That said, the recent weekly AAII sentiment index numbers, which measures bullishness/bearishness of a group of individual investors, suggests extreme levels of bullishness versus historical levels.
As noted, only one piece of the puzzle. But one suggesting that optimism, at least among a particular category of investor, is getting stretched.
position in SPX