The market selloff that started in April and accelerated in May has taken its toll on most of the investor sentiment indicators.

One indicator in particular that has seen a drastic change is the Investors Intelligence report. Last Wednesday's report showed that the bullish percentage dropped from 39.3 percent to 34 percent.

This is the lowest bullish percentage since the fall of 2010 and it comes after the bullish percentage was as high as 54.8 percent in February.

Personally I think the selloff in the second quarter is overdone. Investors have overreacted and now the market is oversold.

It is a total reversal of what happened in the first quarter. The gains we saw in the first quarter came while the economy was limping along and now the second quarter's losses have come under the same conditions.

For the sentiment indicators reach bullish extremes in one quarter and then reach bearish extremes in the next quarter, while little has changed in the economy, is ridiculous.

Investors get too excited as the market climbs and they get too worried when the market slips. By watching the sentiment indicators, we can get a handle on the next move and be proactive rather than reactive.

Watch the sentiment indicators closely and you will know when to take some profits off the table and you will know when it is safe to start putting money back in to the market.