XLC, the Communication Services Select Sector SPDR ETF, is now in the second consecutive week of an accelerating short unwind — and this week the data moved faster than the previous note anticipated.
The short retreat has picked up pace. Shares short dropped another 12% on the week to 6.3 million as of July 14, down from 7.2 million a week ago and well below the June 25 peak of 9.4 million. That peak-to-trough decline now stands at roughly 33% in under three weeks. Short interest as a percentage of free float has fallen to 2.8% — still above the late-May baseline, but the direction is unambiguous. The ORTEX short score dropped sharply to 43.2 on July 14, its lowest reading in the 30-day window and a notable step down from the 50.2 it registered just one session earlier. A score below 50 has historically indicated a net bearish-positioning retreat; the move to 43 suggests the unwind is now well-established rather than tentative.
The borrow market tells the same story, but with even more clarity than last week. Availability has more than doubled in a single session — jumping from 92.6% on July 13 to 257.9% on July 14, meaning there are now roughly 2.5 shares available to borrow for every one currently lent out. That is well into the "normal to comfortable" range and a dramatic reversal from the 21.9% reading that characterised the stressed borrow environment of late June. Cost to borrow has eased to 1.07%, down 20% on the week, though it remains about 17% above its one-month-ago level — a residual of the June squeeze episode that is still fading. Positioning here looks loose rather than stressed.
Options flow adds a layer of nuance that prevents a clean bull read. The put/call ratio for XLC sits at 7.7, and that is not a misprint — the 20-day average runs at 7.3, so the current level is broadly in line with the recent norm and carries a z-score of just 0.26. In other words, the structurally elevated PCR is not a fresh signal; it reflects the persistent hedging characteristic of a sector ETF where puts are commonly used for portfolio protection. Nothing in the options data this week is breaking from recent patterns. The 52-week high of 12.0 and low of 0.74 bracket an unusually wide range, confirming that XLC's PCR has swung dramatically over the past year and that the current 7.7 reading is unremarkable within that context.
The ETF itself ended the week at $111.45, up 0.4% over five sessions after a brief one-day slip of 0.1% on July 14. That follows a note published last week that flagged improving sector sentiment tied to Meta and Alphabet earnings beats. The valuation data on record — a trailing PE near 19x and a price-to-book of 2.9x — dates to September 2025 and should not be treated as current; the ETF's composition and weight distribution have almost certainly shifted in the intervening months.
The key question heading into next week is whether the short unwind has run its course or whether the remaining 6.3 million short shares — still 5% above the late-May base — continue to be unwound, keeping availability wide and borrow costs subdued.
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