Looking at the three main sentiment indicators that I watch for the overall market, the optimism levels are falling.

The latest Investor’s Intelligence report shows that the bullish percentage dropped more than 4 percent to 38.7 percent. This is the lowest bullish percentage since last October.

Interestingly enough it was just last week that I pointed out how the bearish percentage was the lowest it had been since last May. The bearish percentage remained at 20.4 percent.

What this suggests is that there are a lot of people taking a neutral stance right now.

The Investor’s Intelligence report isn’t the only indicator showing a decline in bullish sentiment.

The Rydex Nova/Ursa ratio has been trending lower since the beginning of April and the ratio hit a two-month low just last week.

The CBOE Equity Put/Call ratio has been trending higher in recent weeks and the 21-day moving average on the ratio hit its highest level since the end of December.

While none of these indicators are generating a bullish signal, they are all showing a decline in the overly optimistic levels we were seeing.

If the optimism continues to fall and the indices move into oversold territory, we could be looking at a great buying opportunity in the next month or so.