The bear retreat in XLC, the Communication Services Select Sector SPDR ETF, has accelerated again this week — and the data now looks qualitatively different from where it stood just seven days ago.
The headline number tells the story cleanly. Shares short fell another 15% on the week to 5.85 million as of July 21, down from 6.93 million a week earlier. That brings the peak-to-trough decline to roughly 38% since the June 25 high of 9.4 million — the unwind the previous note described as "well-established" has since extended further and faster. Short interest as a percentage of free float now reads 2.6%, approaching levels last seen before the June surge began. The ORTEX short score dropped to 36.5 on July 21, its lowest reading in the 30-day window and a full 14 points below the 50.8 registered on July 10. A score in the mid-30s indicates the bearish positioning retreat has moved from retreat into something closer to full capitulation.
The borrow market underlines the same conclusion, but the magnitude of the move is striking. Availability has ballooned to 552% — meaning there are now more than five shares available to borrow for every one already lent out. One week ago, availability was sitting near 258%; four weeks ago it was below 45%. Cost to borrow has collapsed in parallel, dropping to 0.53% from above 1.3% in early July and over 2% in late June. These are not tight borrow conditions by any measure. The lending market is wide open, which removes a key mechanical support for any sustained squeeze dynamic.
Options positioning adds a nuanced counterpoint to the otherwise clean unwind narrative. The put/call ratio on XLC is running at 6.2 — well below its 20-day average of 7.7, and nearly two standard deviations beneath that average on a z-score basis. In a product where puts structurally dominate (the 52-week range runs from 0.74 to 12.05), a PCR this far below the recent norm suggests options traders are actually less defensively positioned than usual. Fewer puts relative to calls is a mild contrarian positive for near-term sentiment — though the absolute PCR level remains heavily put-skewed by conventional standards.
The price backdrop is modest but not alarming. XLC closed at $110.03 on July 21, down 1.3% on the week and off 0.7% on the day, though still up about 0.5% over the past month. The one-week dip has come alongside the short unwind rather than because of it — covering pressure typically supports prices, and the lack of a sharper rally despite heavy covering suggests the ETF's underlying holdings (dominated by names like META and Alphabet) are carrying some independent macro weight around digital advertising and AI monetization narratives heading into earnings season.
The combination to watch next is whether short interest stabilises near current levels or continues lower — and whether the options market's unusually light put loading holds as major communication-services names report earnings in the weeks ahead.
See the live data behind this article on ORTEX.
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