The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (

TheStreet

) -- At the FRED Report (

www.theFREDreport.com

), we follow what we call the Three Market Principles to analyze stock market behavior. These are (1) Sentiment, (2) Internal Momentum, and (3) External Momentum. We mention this to

TheStreet

readers because we have not written much about investor sentiment in these columns. Price momentum (3), and breadth momentum (2) indicators are much more widely discussed, both by us and other analysts.

We look at two basic sentiment indicators. The first is from a sentiment poll, Investor’s Intelligence.

We use the %Bears number exclusively, because we believe that while bulls can be complacent and therefore, not take action, bears almost always act on their emotions.

We also use put/call ratios as the purchase of puts and calls are actions investors are actually taking in the marketplace. We feel that these two indicators cover both the thoughts and feelings of investors, and also their actual activity (how they express those thoughts and feelings).

We mention this because this Libyan crisis has had little to no effect on bullish sentiment, which has become pervasive (in contrast to last summer, when I was one of the only bulls in writing – see our articles in July and August of 2010). We show some current sentiment charts below.

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Notice how %Bears is in the 20% area, about where it was before the April to July 2010 market correction. This is interesting to us because recent turbulence in the Middle East has not caused investors and their advisors to become more bearish.

We note that there is a week’s lag in this data, but the last reading we have on the chart, Feb. 18, is the lowest reading of %Bears since April 23

. In other words, while these readings may not include all of the Libyan events, they certainly reflect opinions about Egypt.

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We show our put/call chart above. Observe that there was a spike in put buying around Feb. 5, but this has not occurred as the Libyan crisis has unfolded. This is a concern as what this suggests is these events, which might affect our oil supply, and also the stability of one of the most important geopolitical areas of the world, are being greeted with complacency by investors. For this reason, we continue with our cautious stance – yes, there has been some selling because of recent news, but not the sort of real “panic” sort of selling we have seen at other key lows in the market, illustrated by high put buying. It is possible that we see higher put/call numbers before this correction runs its course.

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Fred Meissner is founder and publisher of

The Fred Report

. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report. A detailed bio is here:

Fred Meissner

.