I monitor the Worden T2108 Indicator and the Investors Intelligence poll to assess if the market has reached an extreme level of bearishness or bullishness. The T2108 closed Tuesday at 79%. This is close to the level where prior market rallies have topped out. Similarly, far more advisers are bullish than bearish (49.5% vs. 30.5%). This is a contrary indicator. The market is likely to top out when there are many more bulls than bears. The weekly chart below demonstrates that at 79%, the T2108 is near its peak level. Click on chart to enlarge.
The sentiment indicators suggest to me that I need to raise stops or hedge my long positions in my trading account so I do not lose all of my recently generated gains.