XLC, the Communication Services Select Sector SPDR ETF, enters July with a notable reversal in the short positioning story that dominated last week's note.
The most important change from the June 24 article is in the borrow market. Availability has swung sharply back open — from 21.9% at its tightest on June 25 to 91.7% by June 30. That is a dramatic loosening inside five sessions. Cost to borrow peaked at 2.09% mid-week before pulling back to 1.48% by month-end, still nearly three times the sub-0.6% levels that held through most of May but well off the week's high. The directional pressure that had compressed availability into genuinely tight territory has eased, at least for now. The 52-week minimum hit 2% at its most extreme, so last week's squeeze was a real, if brief, stress event — this week's reprieve brings availability back toward a more workable range without fully unwinding the underlying positioning shift.
Short interest tells a more ambiguous story this week. Bears added aggressively through mid-week, with shares short touching 9.4 million on June 25 — a 30-day high. Then the position unwound sharply: shares short dropped 13% on June 24-25 reversal and fell a further 7% on June 30 alone, pulling SI back to 3.61% of free float. The month-on-month comparison still shows a 37% increase in shares short from early June levels near 5 million, so the structural build remains intact. What changed is the conviction at the margin. The purposeful add described in the June 24 note peaked around June 25 and then retreated — not a full unwind, but bears clearly reduced exposure into month-end.
Options positioning reinforces the cautious read. Put/call ratio for XLC is running at 8.23, comfortably above its 20-day mean of 6.55 — roughly one standard deviation elevated. The 52-week range spans 0.74 to 12.05, so the current reading is in the upper half of the year's distribution without being extreme. The put-heavy skew has been persistent since late May, when PCR climbed from the high 7s and briefly dipped to 3.9 in mid-June before jumping back above 8 in the most recent week. That pattern suggests options traders continue to pay up for downside protection on the sector, even as short sellers trimmed heading into quarter-end.
The ORTEX short score has drifted lower through the week, ending June 30 at 51.6 — down from a local high of 54.9 on June 25. That mid-50s reading represents a modest bearish lean on a 0-100 scale but nothing approaching extreme short conviction. The score's recent arc mirrors the positioning story: a build through the middle of last week followed by a partial retreat. The stock itself closed at $107.13, down just 0.13% on the week and off about 7.4% over the past month, reflecting broader sector pressure on communication services names into the quarter's close.
What to watch next is whether the borrow market stays loose or tightens again: availability snapping back to 91.7% from 21.9% in five sessions is a large swing, and the structural short build since early June means the underlying demand for borrows has not gone away — it has simply paused at month-end.
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