XLV, the Health Care Select Sector SPDR ETF, enters the second week of July with a notable split in the data: the fund is up 3.6% on the week and 7.5% over the past month, yet the short interest rebuild that dominated the June narrative has started to reverse.
The shift in short positioning is the clearest change since the July 1 note. Shorts have pulled back modestly — short interest fell 3.5% on the week to 5.3% of the float, around 13.76 million shares. That follows a near-uninterrupted build from roughly 9.5 million shares in mid-June to a peak of about 14.25 million on June 29. The ORTEX short score eased to 49.3 from 52.0 earlier this week, suggesting the pressure that characterised June has softened slightly — though at 5.3% of float, the overall short position remains elevated relative to where it started the summer. The direction of travel has changed; the size has not.
Borrow conditions tell a similar story of mild loosening. Availability has widened back to 229% — comfortably in normal territory and well above the 52-week tightest reading of 24.2%. That compares to 222% at month-end, when availability had collapsed from over 2,000% in late May. Cost to borrow ticked up 12% on the week to 0.51%, a modest move that keeps borrow firmly in the "cheap and easy" category. The lending market is not signalling any squeeze pressure from current levels. Options positioning is similarly relaxed: the put/call ratio at 1.27 is marginally below its 20-day average of 1.31, and the z-score of –0.51 puts it well within normal range. Hedging demand has actually eased as the fund has rallied.
Institutional flows, last reported through March 31, show a broadly mixed picture among the top holders. Morgan Stanley remains the largest named holder at 4.6% of shares but trimmed its position modestly last quarter. Bank of America and BlackRock were the more notable accumulators — BofA added 528,000 shares and BlackRock added 235,000. Goldman Sachs Asset Management added 156,000 shares. The pattern across the holder list is consistent with broad-based rebalancing rather than a directional conviction trade in either direction.
The week worth watching now is whether the short position continues to unwind alongside the price strength, or whether shorts use the rally as an opportunity to rebuild. The June build happened almost entirely during a period when the fund was rising — a pattern where availability tightens further and borrow costs begin to move more decisively would signal that dynamic is resuming rather than reversing.
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