XLB, the Materials Select Sector SPDR ETF, is navigating a week of partial short-seller retreat — but the lending market has not fully normalised, and the stock has given back ground even as the macro case for materials improved.
The clearest development since the August 12 note is that the acute borrow squeeze has loosened — but only partially. Availability has recovered to 77.6% from the 27.1% crisis point reported last week, meaning roughly three shares are now available for every four already borrowed. That is a genuine improvement, and cost to borrow has fallen sharply with it, down 34% on the week to 0.45%. Short interest itself has also edged back: from a peak near 27.4% of the free float on August 11, it has pulled in to 26.4% — still elevated for a broad sector ETF, still well above the 23% range that defined late July, and still running 16.6% higher than seven days ago. The direction has reversed, but the scale of the prior build means positioning remains heavy by historical standards. The 52-week availability low of 3.9% — hit in early July — is not an immediate threat, but the journey from 130% to 27% and back to 77% in the space of two weeks illustrates just how active the borrow market has become around this name.
Options positioning offers little drama by contrast. The put/call ratio is almost perfectly in line with its 20-day average — 0.64 against a mean of 0.641, a z-score barely below zero. The 52-week range stretches from 0.47 to 8.82, making the current level look almost unnaturally calm. Options traders are neither hedging nor chasing; they are effectively sitting on their hands while the short book does the moving.
The ORTEX short score at 61.4 is consistent with the elevated-but-retreating short interest picture. It has been running in the low-to-mid 60s all week, up from the high 50s registered at the start of August when the squeeze was at its tightest. That mild elevation reflects the unresolved tension: positioning is still net cautious, but the most aggressive phase of the short build appears to have passed.
On price, XLB closed at $51.78 — down 2.7% on the week and off 0.9% on Tuesday — despite a month-over-month gain of roughly 2.5%. The disconnect between the positive one-month drift and the weekly pullback is worth noting: the August 12 note flagged a rebound in materials stocks on softer inflation data and rate-cut expectations, but that optimism has not held through the week. Analyst data is too stale to be actionable, and no earnings event is scheduled for the ETF.
What to watch next: whether availability holds above 50% — the threshold between tight and very tight — or begins another leg lower, which would signal a fresh round of short-building in the materials sector.
See the live data behind this article on ORTEX.
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