Does Sentiment Matter Anymore?

There are many sentiment indicators showing investors are at their least bullish in years or decades. Do these indicators still matter? I don't trust them anymore for one reason. I've heard many bulls say they think a correction is possible, but not a bear market. If those people were surveyed about the market over the next three to six months, they'd be bearish. Yet, a quick look at their portfolios would show they've barely taken any action. They might have rotated out of technology into energy, but they're otherwise fully invested.

This is reflected by hard data such as the money market funds and bear versus bull fund ratios at Rydex. These types of indicators, along with margin data, are at levels so extremely bullish that the only period more bullish is the prior three months. My view: the Fed broke sentiment. Investors really believe a bear market is impossible.