As WillK mentioned, the sensor is usually a lever on the motor bracket. It is usually a variable resistor, and spring loaded so it follows the engine position. Often it becomes salt-encrusted, or the grease that lubes it thickens up, and it stops following the motor position.
Take a look at your bracket, and see if you can find a lettle lever that gets moved (or in your case, possibly doesn't get moved) by the midsection frame of the motor. You'll have to figure out how to free it up (I'm not familiar with Evinrudes.)
If you find the sensor and move it manually and the needle doesn't move, then you've probably got a bad connection in the wiring somewhere.