All the evidence I see, both anecdotal and statistical, tell me that investors are at an extreme level of bullishness. It seems everybody is geared up for a year end rally and the bears are non-existent. Normally, under these circumstances I would be aggressively shorting the market. However, experience has taught me that this is the time of the year when sentiment often gets extreme and stays extreme.
Statistically, the only thing the bulls have going for them is that the market is not overbought. The S&P 500 is roughly in the same place it was a month ago. Additionally, the Ireland crisis is still showing up in the shorter term statistics. That said , the bulls are close to all in long and its tough to see where the fuel for a continued rally will come from. But the Grinch doesn't usually get paid much at this time of year.
The best of the gains are likely behind us and there is room for a small correction in the next couple of weeks but a bigger correction will probably have to wait until January. As such my shorting is largely to hedge my longs and I am not net short.