If the majority of market participants are underexposed to equities, what tends to happen to the market?
It goes higher.
There is a similar tendency in the options market.
If investors load up on puts at any sight of weakness, they become overhedged and therefore underexposed to equities.
This past week, the S&P 500 index corrected almost 2%.
In that same timeframe, the VIX rallied 30%, back to levels from the beginning of the year.
It's a continuation of the "bullish but cautious" crowd-- a pseudo-acceptance of this rally but ready to load up on puts at any sign of weakness.
This is how you can have a non-complacent bull market, the cliched "wall of worry."
And now the market is gapping up higher, leaving those who bought expensive premiums holding ineffective hedges.
If we ever see a downside move in the S&P with a non-move in the VIX is where you should be concerned-- it would indicate acceptance that every dip will be bought.