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The story in XLI has shifted since the September 28 note: the bears who spent six weeks relentlessly adding have quietly begun to pull back, and the borrow market has swung from near-total seizure to its most relaxed state in months.
Short interest has fallen from its peak. It topped out at 17.3% of free float on September 25, the level flagged in the previous ORTEX note as the high-water mark of a 32% build over 30 days. Since then, shorts have trimmed: shares short dropped nearly 2% over the past week to 16.4% of float, with a further 1.5% day-on-day decline on October 6. The ORTEX short score, which hit 70.9 in the prior window, has also eased, falling from 70.4 on October 1 to 67.4 on October 6. That is still elevated, but the direction has reversed. The bears are not running, they are stepping back.
The borrow market tells a sharper version of the same story. The critical episode was September 21, when availability collapsed to 1.3%, the 52-week floor, meaning almost every share available to lend was already out on loan. That was the peak squeeze. Since then, availability has moved dramatically in the opposite direction, reaching 142% on October 6. For context, mid-August saw availability above 250%, so the borrow market has not fully normalised, but the lending pool is no longer anywhere near exhausted. Cost to borrow remains low at 0.84%, up roughly 45% over the past month in absolute terms but still a trivial rate that creates no meaningful pressure on short positions.
Options positioning has also rotated. The put/call ratio on XLI has fallen to 1.71, below its 20-day average of 2.0 and close to its 52-week low of 1.47. A month ago, PCR readings were running above 2.5, consistent with heavy defensive hedging into a market that looked more fragile. The current reading, roughly 0.9 standard deviations below the recent mean, suggests options traders have reduced their downside protection. Calls have been gaining relative ground for two weeks. This is the same dynamic the September 28 note flagged as an early pushback; it has continued and strengthened.
The institutional register, last updated at end of June, shows a mixed picture among the largest holders. Morgan Stanley and JPMorgan both trimmed positions in Q2, while Wells Fargo added. Goldman cut by more than 1.6 million shares. These are ETF mechanics as much as conviction trades, but the net direction among the large banks was slightly negative heading into Q3. Whether that has continued is the next data point to watch, when 13F filings for the September quarter start arriving in mid-November.
What to watch next is whether the short interest decline accelerates or stalls. The past week's trim is modest. At 16.4% of float, shorts remain in a position large enough to matter, and the speed with which availability tightened to near-zero in September shows how quickly conditions can flip. The next test is whether XLI can hold its October gains, up 1.4% on the week to $171.58, in a month where it is still down just over 2%.
See the live data behind this article on ORTEX.
Open XLI on ORTEX →ORTEX Market Intelligence content is generated by AI from a snapshot of ORTEX's proprietary data and reviewed by the ORTEX team. Content is informational only and does not constitute investment advice.
