Sentiment is best used as a trading tool when it is at a bearish or bullish extreme. Currently sentiment indicators point to an investing community that is confused. The Investors Intelligence, NAAIM, Consensus and Market Vane surveys are mixed. Rydex traders are excessively bullish while the put/call ratios and the AAII survey point to excessive bearishness.
Overall I would characterize sentiment as slightly on the bearish side but not at an extreme. After being whipped around the past few years it seems that investors don't want to commit too far into either camp. This should lead to a continuation of the wide trading range we have been in until there is more clarity one way or the other with regards to earnings and the crisis in Europe.