XLI, the Industrial Select Sector SPDR ETF, has spent the past week testing whether a borrow market that hit rock bottom can stabilise — and so far, the answer is a partial yes, even as short interest pushes to a fresh high.
The borrow picture has shifted marginally from the extremes flagged in Tuesday's note. Availability was at its 52-week floor of 1.3% on September 21. It has since edged back to 8.3% — still deeply tight, but no longer at the absolute limit. For context, availability was running above 250% as recently as mid-August, so the lending pool remains close to fully consumed. Cost to borrow has continued to climb, reaching 1.44% on September 22. That is more than double where it was a week ago and nearly three times the mid-August baseline of around 0.46–0.53%. For a liquid, large-cap sector ETF, a CTB above 1% with availability still in single digits is an unusual and elevated combination.
Short interest is not pulling back with the marginal borrow relief — it is still rising. At 16.3% of free float, it has added another 1.2 million shares since Tuesday's note and is up 13.5% on the week. The 30-day build is now 32%, bringing total short shares to roughly 24.8 million. The ORTEX short score has edged higher too, reaching 70.8 — its highest reading in the 10-day history available, and a steady grind upward from 67.3 on September 9. Shorts are not covering; they are still adding.
Options positioning has shifted in a way that partially cuts against the bearish grain. The put/call ratio has dropped to 2.00, almost 1.75 standard deviations below its 20-day average of 2.42. That puts the PCR near its 52-week low of 1.91 and represents the least defensive options posture recorded for XLI in at least a year. Throughout August and into early September, the PCR was consistently above 2.4 — the move lower this week suggests options traders are hedging less aggressively even as short sellers add. The ETF itself is up 0.8% on the week to $170.27, recovering a portion of a 5.5% one-month decline.
The institutional register shows the major banks trimmed into the June quarter-end. Morgan Stanley and JPMorgan both cut positions — by 653,000 and 999,000 shares respectively — while Goldman Sachs made the largest reduction at 1.6 million shares. Wells Fargo bucked the trend, adding 466,000 shares. These are Q2 disclosures and predate the sharp September short build, so they offer context rather than real-time signal. The divergence between the bank trims and the smaller managers adding — Phoenix Investments put on nearly 1.4 million shares — reflects no single dominant view among holders as of mid-year.
The setup heading into next week sits at an interesting tension: short interest at a 30-day high and the ORTEX short score still climbing, while borrow availability has at least stopped collapsing and options traders are hedging less. Whether availability stays above its floor or revisits the sub-2% levels seen on September 21 is the near-term tell for how much additional short-side pressure remains to be absorbed.
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