That’s according to the options experts at McMillan Analysis Corp., who today note that their computer generated Put-Call Ratio Sell Signal has been visually confirmed by SLV’s chart (see below):
McMillan explains the significance of put-call ratio as follows:
The put-call ratio is simply the volume of all puts that traded on a given day divided by the volume of calls that traded on that day. The ratio can be calculated for an individual stock, index, or futures underlying contract, or can be aggregated – for example, we often refer to the equity-only put-call ratio, which is the sum of all equity put options divided by all equity call options on any given day. Once the ratios are calculated, a moving average is generally used to smooth them out. We prefer the 21-day moving average for that purpose, although it is certainly acceptable to use moving averages of other lengths.
Given that SLV’s put-call ratio, as illustrated in the chart above, is back toward historical lows, the contrarian indicator is exhibiting a “sell” signal here. Note that this isn’t a guarantee of a pullback, but is indicative that the probability of a short-term selloff is at a heightened level right now.
The iShares Silver Trust ETF (NYSE:SLV) was trading at $16.50 per share on Thursday morning, down $0.15 (-0.90%). Year-to-date, SLV has gained 9.20%, versus a 8.93% rise in the benchmark S&P 500 index during the same period.