XLC, the Communication Services Select Sector SPDR ETF, has reversed course sharply — the short-seller retreat documented just one week ago has unwound with notable speed, and the borrow market is tightening in step.
The turnaround in short positioning is the standout this week. Short interest has climbed roughly 37% in seven days, from around 4.8 million shares at the start of June to nearly 6.6 million now — pushing SI % of free float back to 2.9%. That erases almost all of the decline from the mid-May peak and takes the monthly change to nearly 40%. The direction of travel has flipped from "clearly downward," as this note described a week ago, to a meaningful rebuilding of bearish positions. The short score has moved in lockstep, rising from 39 on June 1 to 49.5 as of June 9 — the highest reading in the past ten days and back near levels that prevailed through mid-May.
The borrow market has tightened in parallel, though it remains far from extreme. Availability has dropped sharply — falling from 341% on June 1 to just above 100% now, a decline of roughly 60% in a single week. That means the lending pool has gone from very loose to modestly tight in under five sessions. Cost to borrow remains low in absolute terms at 0.61%, though it has edged up around 14% on the week. With availability barely above 100%, there is now roughly one share available to borrow for every share already shorted — a noticeably different picture from the relaxed conditions of last week, though still well above the 52-week tightest reading of 2%.
Options tell a contrasting story. Put/call positioning has actually become less defensive this week. The PCR has dropped to 6.4, more than one standard deviation below its 20-day average of 7.3 — meaning relative call interest has risen compared to recent norms. The PCR is well off its 52-week high of 12 and closer to the low end of its range at 0.74. That divergence is worth noting: short sellers are rebuilding positions while options traders are, if anything, leaning less bearish than their recent baseline suggests.
The price context adds a further wrinkle. XLC has lost nearly 5% over the past month and is down 1.8% on the week at $111.48, though it recovered 0.35% on Tuesday. The valuation backdrop is fairly modest — the fund trades on a PE of roughly 19x, little changed from a week ago, with price-to-book near 2.9x. Both multiples have drifted higher over the past 30 days as earnings season provided some support to underlying holdings like Meta and Alphabet, but the monthly price decline suggests that earnings tailwind has not been enough to hold the ETF at its prior levels.
The setup heading into next week is therefore a tension between two signals pointing in opposite directions: short sellers are rebuilding at pace while options positioning has moved in the other direction. Whether the spike in short interest reflects genuine conviction or tactical hedging around sector-specific catalysts — regulatory headlines, ad-spend data, or macro moves affecting the big-cap tech names that dominate this ETF — will determine how the borrow market behaves from here.
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