In the past week or so, the stock market has pretty much sloughed off the worst blackout in U.S. history and two gruesome terrorist attacks in the Middle East. After Wednesday, you can add

Hewlett-Packard's

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disappointing earnings and another rout in Treasuries to the list of events that seemingly had the potential to prompt a serious selloff but didn't.

Granted, there's been some good corporate and economic news in the same period. But recent gains, including 52-week highs for the

Dow Jones Industrial Average

and

Nasdaq Composite

earlier this week, as well as Wednesday's very modest setback, speak to a market in a bullish mode, assuming there's truth to the old adage: "It's not the news but the market's reaction to the news that counts."

The market's resilience to negative news is both a reflection of and, subsequently, contributor to an overriding positive sentiment among market participants. The CBOE Market Volatility Index (VIX) and its Nasdaq counterpart (VXN) both rose Wednesday but remain mired near multiyear lows. The put/call ratio settled at 0.62 Wednesday and has been below 1.0 every day this month save Aug. 7.

Meanwhile, Chartcraft.com reported that bullish sentiment in its

Investors' Intelligence

poll rose to 55.1% as of Aug. 20 from 52% on Aug. 13. Bearish sentiment fell to 18.4% from 19% while those expecting a mere correction slid to 26.5% from 29%.

As of Aug. 13, the American Association of Individual Investors' survey was at over 50% bulls. (The AAII survey should be updated Thursday.) Optimism among retail investors is further evinced by the $17.4 billion of inflows in into equity mutual funds in July and another $4 billion in the first two weeks of August, according to AMG Data Services.

In sum, there seems to be a self-replicating cycle afoot. Investors' faith that highly accommodative monetary and fiscal policies will boost economic growth is prompting gains for stocks, which is making investors yet more bullish.

However, conventional wisdom says sentiment is a contrary indicator -- - if everyone is so bullish, they've presumably committed their capital already. Thus, many skeptics predict these indicators augur a sharp fall for equities, and the fact people are again betting on a 'Greenspan put' is truly frightening.

Still, the market has turned a deaf ear to those concerns for a few months now and anecdotal evidence suggests sentiment is maybe not so bullish after all.

Sentiment All Over

"Consensus is building that we'll have a fall splat," said one trader, unintentionally echoing the growing skepticism or outright bearishness among many

RealMoney.com

contributors, including Bob Marcin, Cody Willard, Helene Meisler, James dePorre (prevacation, at least), Alan Farley and, of course, Bill Fleckenstein.

Although those folks don't necessarily represent mainstream opinion, "I think people are not bullish," agreed John Roque, technical analyst at Natexis Bleichroeder and a

RealMoney.com

contributor. "Guys with good numbers year to date aren't raising their hands in the air saying, 'I'm getting longer.'"

Ironically, Roque is fairly upbeat, in part because of the dour attitudes he sees among others. "If the banks don't weaken, the likelihood the market corrects importantly is very small," he said, suggesting that as long as

Citigroup

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remains above $42.50, the stock, the Philadelphia Stock Exchange/KBW Bank Index and, ultimately, the major averages, should hold up.

The technician dismissed the low VIX as confirmation of what has occurred, not a harbinger of a "big reversal." (As an aside, many observers seem to be dismissing the low VIX these days, similar to

March 2002, which ultimately proved to be a dangerous mentality.)

Rick Bensignor, chief technical strategist at Morgan Stanley, didn't dismiss the VIX but does believe "there are definitely people out there who think the market's inability to make progress in the last 12 weeks

despite good economic news is meaningful."

The Daily Sentiment Index of S&P 500 futures traders showed a four-day average of bullishness at 66%, which is "high, but not excessive," he noted. Lowrisk.com's sentiment survey had 55% bulls as of Aug. 17, but that's up from only 17% the prior week.

Meanwhile, the

Investors Intelligence

poll is "not high on my list because it's

a survey of newsletter writers, and I don't think they have the same sway today as in the past," Bensignor continued. "By and large they are not people who make critical, large money-management decisions."

Low cash holdings of mutual funds suggests institutional money managers are quite bullish. But Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray in Minneapolis, believes most portfolio managers are less outright optimistic than fearful of missing out on the next rally.

He further argued that most hedge fund managers are bearish, having survived the prior three years via short-selling. And while retail investors have recently warmed up to equities, they're not doing so in dramatic fashion and had turned a decidedly cold shoulder to stocks in 2002.

In response to a

Columnist Conversation

post on this subject, a reader made a critical observation: There's not a lot of

conviction

among either the bulls or bears right now, "perma" members of either camp aside. A little move up and short-sellers are covering. Conversely, those long are quick to head for the exits at the first signs of weakness, which is why fund managers being long due to "performance anxiety" vs. outright bullishness is significant.

This lack of conviction explains, in part, why it's seemingly so hard to pinpoint the true state of sentiment these days.

Fading the Fade

Another factor contributing to the confusion is the increased awareness of sentiment indicators.

"Everybody is interpreting

sentiment figures bearishly and they continue to raise these concerns," said Joe Sunderman, director of trading at Schaeffer's Investment Research in Cincinnati. "But once everyone is looking at

sentiment, it loses its effectiveness, which is one reason why there's been a lack of contrarian follow-through as in the past."

In a convoluted way, that may explain the market's recent strength despite the bearish message of many sentiment indicators. Time will tell if it's just a big rationalization for why a seemingly overvalued, overloved market has stayed afloat.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.