As noted in the chart below, the purple line indicates the less volatile 8-period moving average of the bullish sentiment level as been declining since late 2003. In other words, the S&P 500 advance since that time has occurred as investors, on average, have been less bullish. Since the sentiment indicator is a contrarian one, it makes some sense that the markets has risen as the individual investor has become more cautious.
On the other hand, since the end of the first quarter in 2005, individual investors are increasingly becoming more bullish. The 8-period moving average increased to 39.0% in the period ending 6.27.2007 versus 37.7% for the 8-period average ending 6.20.2007. To me it does not appear we have experienced the speculative blow off rally with high investor bullishness. Is the time getting nearer though? It should be remembered this indicator is a volatile one and should not be used on a stand alone basis.