The weekly chart below shows SPY with the 2 period RSI and MACD. Notice that this is the second time this year when RSI(2) is below 30. MACD is below its signal line which is also sign of weakness.
The Put/Call Ratio is simply the Put Volume divided by the Call Volume:
Put/Call Ratio = Put Volume / Call Volume
The Put/Call Ratio can be calculated for individual securities or a large number of stocks or indexes or both. The Chicago Board Options Exchange (CBOE) has three popular Put/Call Ratios, the $CPCE is the Equity Put/Call Ratio, the $CPCI is the Index Put/Call Ratio and the $CPC is the Total Put/Call Ratio. The Total Put/Call Ratio often moves above and below the 1.0 horizontal line. Depending on market conditions the range of the Put/Call Ratio can change over time.
Investors are buying more puts to hedge against market weakness or bet on a decline. Calls are purchased to bet on market advance. When investors are extremely bullish the Put/Call Ratio reaches low levels and when they are extremely bearish it reaches high levels.
In this sense the Put/Call Ratio can be used as a sentiment indicator. It also can be used as a contrarian indicator. Extreme low levels on the Put/Call Ratio could be a sign of possible market decline and extreme high levels of Put/Call Ratio could be a sign of possible bullish reversal.
Currently $CPC, the Total Put/Call Ratio is on low level if we compare it to other lowest levels this year. This could be the sign of a short term bearish reversal.
See the chart below with the 10-day and 200-day SMA and with $SPX in the background. There is also a 1.0 horizontal line. The Correlation Coefficient shows that for the most part the correlation between $CPC and the S&P 500 is negative.