XLC Shorts Rebuild as the ETF Slides 6% on the Week

XLC, the Communication Services Select Sector SPDR ETF, has reversed the covering trend flagged last week: short interest jumped back up even as the fund fell sharply, suggesting fresh bearish positioning rather than a simple re-test of prior levels.

The shift in short interest is the clearest change from last week's note. Short interest rose 18% over the past week to 6.48 million shares, or 2.86% of free float. That partially unwinds the covering that had pushed the position to a 30-day low near 5.5 million shares. The direction of travel has flipped from bearish retreat to bearish rebuild, and it coincides with a 6% weekly drop in the ETF to $103.58. Borrow cost eased 19% over the week to 0.59%, still a low absolute rate. That move is consistent with the prior note's observation that the borrow market is not supply-constrained: availability has actually loosened further to 395%, meaning roughly four shares remain available to lend for every share currently borrowed. New shorts are going on cheaply and easily.

Options positioning stays structurally defensive but has eased slightly from recent extremes. The put/call ratio is 1.38, a touch below its 20-day average of 1.43, putting the z-score mildly negative at -0.82. For context, the PCR has been running above 1.30 for most of October, reflecting persistent demand for downside protection across the sector. The 52-week high of 12.05 reflects an extreme episode well above current levels, so today's reading looks like sustained caution rather than panic. The ORTEX short score has drifted lower over the past two weeks, from 44 on October 14 to 39.9 now, which reflects the partial covering earlier in the month. The score will likely tick back up as this week's short rebuild is captured.

Valuation multiples are stale (as of September 2025) and should be treated as background context only. At that date the ETF's underlying basket traded at a trailing P/E near 19x and a price-to-book of 2.9x. Those figures are referenced here for completeness; given the data age, they carry limited weight in the current setup.

The picture this week is a fund under fresh selling pressure, with shorts rebuilding at low cost into a 6% weekly decline. Whether the renewed short interest reflects macro concern, sector-specific earnings anxiety around the ETF's largest holdings, or simple momentum following the price break is the question worth tracking over the next few sessions.