EWW has dropped 5.5% over the past week — and the shorts who have been building positions since early May are finally getting the move they were positioned for.
The short side has not capitulated despite the price weakness. Short interest pulled back modestly over the week, down 3% to 8.5% of the free float, but remains dramatically elevated versus where it stood a month ago — up 43% over that window from barely 5% of float in early May. The ORTEX short score has held in the low-to-mid 60s all week, closing at 63.8 out of 100, consistent with the elevated positioning flagged in the June 3 note. The week's small reduction in shares short looks more like routine rebalancing than a genuine unwind.
The more striking development is what has happened to the borrow market over the past few days. Availability has collapsed from 108% on June 5 — a level that implied relative ease for new shorts entering — to just 27.7% by June 9. That is the tightest reading since late May, when availability briefly touched 21%. For context, the 52-week low is 17.4%, so the lending pool is now approaching its most constrained level of the past year. Borrowing costs have risen in lockstep, climbing 14% on the week and more than doubling over the past month to an annualised rate of 2.45%. The direction of travel is clear: as shorts pressed their positions through May and into June, the available borrow shrank, and the cost of maintaining those positions climbed.
Options positioning has remained stubbornly cautious throughout the price decline. The put/call ratio has run consistently above its 20-day average for more than a week, currently at 1.34 versus a mean of 1.30. That is not an extreme reading — the z-score barely registers at 0.34, and the 52-week high of 2.09 is far above current levels — but the persistent elevation of puts relative to calls suggests protection demand has not faded even as the ETF has already sold off. The PCR has been structurally higher since mid-May when shorts were also building: both signals point the same direction.
On the ownership side, the March 31 institutional data shows some interesting flows worth noting. Morgan Stanley added nearly 274,000 shares, JPMorgan added roughly 59,000, and BTG Pactual initiated a position of 511,000 shares — a meaningful new entry from a Brazil-based asset manager with regional EM expertise. UBS, by contrast, trimmed nearly 324,000 shares, and Goldman's broker-dealer arm cut by 210,000. The pattern is mixed but the BTG Pactual entry stands out: a Latin American manager building a fresh stake at the same time international shorts were piling in creates an interesting tug of war between regional conviction buyers and macro-driven sellers.
The next focal point is whether the borrow market continues to tighten toward its 52-week low of 17.4%, and whether the continued price pressure causes any of the short positions built up over May to cover — or whether the cost-of-carry increase prompts new entries to reconsider before the trade reaches full expression.
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