XLI, the Industrial Select Sector SPDR ETF, is showing early signs of renewed short-side pressure — a week after the lending market looked fully relaxed, availability has tightened sharply and borrowing costs are climbing again.
The lending picture has shifted noticeably in just a few sessions. A week ago availability was running above 167%, meaning ample supply in the pool. It has since contracted to around 90% — tighter than at any point in the past two weeks. That move happened fast: on June 3 availability was sitting at 87%, then loosened briefly to 119% on June 5 and jumped to 167% on June 8, before snapping back down to 90% on June 9. The borrow cost has followed. Cost to borrow hit 0.65% in early June — its lowest level since late April — and has since climbed nearly 30% on the week to 0.84%. Both moves are consistent with renewed demand for borrows, even if conditions remain far less stressed than the near-zero availability episode of late April. Short interest itself edged up 3.1% on the day to 21.8 million shares, or 14.3% of the float, though it remains around 17% below its April peak. The direction of travel has clearly turned, even if the magnitude is modest so far.
Options positioning is heavily skewed toward puts, though that is not unusual for this ETF. The put/call ratio is running at 4.03, modestly above its 20-day average of 3.98 — a z-score of just 0.25, meaning options sentiment is essentially in line with recent norms. The 52-week range for the PCR runs from 1.90 to 5.54, so the current reading is elevated in absolute terms but unremarkable in context. Options traders are not expressing incremental alarm.
The ORTEX short score has climbed to 65.9, the highest reading in this 10-day window and up from 62.6 on June 8. The combined score sits at 65.9 as well. Both scores reflect the uptick in short interest and tightening borrow, and are worth watching as a leading indicator if the trend continues. The score spent most of late May in the 65–66 range before dipping mid-week and has now recovered back to the top of that band.
Institutional holders as of end-March show a broadly mixed picture. Morgan Stanley added over 1.35 million shares in Q1 to become the largest holder at just over 7% of shares. JPMorgan and Wells Fargo also added materially. Goldman Sachs trimmed its position by nearly 1.9 million shares — the largest reduction among the top holders. The overall holder count of 464 institutions underscores XLI's role as a broad tactical vehicle, used as much for hedging macro exposure as for directional industrial bets. The previous note from June 3 described the lending market as having returned to a "broadly comfortable state" after the April squeeze — the data since then shows that comfort was short-lived, with both cost to borrow and short interest ticking back up. What to watch is whether availability continues tightening below the 80% level that preceded last month's more acute borrow stress, and whether the short score pushes to new highs for the current period.
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