There is $700 million to buy market on close.

Thanks for reading my Diary today and all week -- I hope it was helpful.

Enjoy your weekend!

I have sold the balance of my SPY June 210 puts for a loss and I am buying a medium-sized position in the SPY June 212 puts at $3.35, ramping up my short exposure with some defined risk.

The first takeaway today is that the hoped-for sharp acceleration in the rate of second-quarter 2015 domestic economic growth is less likely than the consensus expects. Strength in utilities, bond funds, REITs and, most importantly, a 10-basis point drop in the 10-year U.S. Treasury note seem to endorse the morning's weak economic data. 

Second, recent correlation between higher bond prices and higher stock prices has decoupled briefly, with bonds soaring and stocks flat today. (We don't know if this is the start of a new trend).

Third, high-beta, high-octane stocks (e.g., Netflix (NFLX), Tesla (TSLA), Priceline (PCLN)) continue to find bids.

• Midday musings from Sir Arthur Cashin:

Traders are quite frustrated by lack of any follow-through to last night's S&P record high close.  In a true range breakout, traders would assume short covering and a rush from fence sitters.

Expiration day today shouldn't smother normal breakout response so traders begin to question the validity of "breakout".

Sunday, May 17th is the 223 Birthday on the NYSE and no, I wasn't there.

Closed-end municipal bond funds are trailng the rally today in fixed income.

I am bidding across the board.

From Zero Hedge - look at the employment gap and note the year "the last time this happened." 

On the long side I am bidding (under the market) for Twitter (TWTR), Potash (POT) and Radian Group (RDN).

As well, I am bidding across the board for regional banks.

The "Bad News Is Good News" feature of the equity market is getting too entrenched and accepted in investors' and traders' mindsets.

I raised my short exposure further this morning based on the ever-widening chasm between financial asset prices (higher) and the real economy (disappointing).

The chasm has gotten so large that I am prepared to take some more short-term pain for long-term gain.

Industrial production in April fell 0.3%, worse than expectations of no change, but offsetting this was a three-tenths upward revision to the March figure so we'll consider it a push. The manufacturing component was flat month over month vs. the estimate of up 0.2%, but March was revised up by two-tenths. The mining component, which houses oil/gas drilling, continues to be an obvious drag as it fell for a fourth straight month.

Machinery orders also fell for the fourth month in the past five. Production of computers and electronics was unchanged after two months of negative prints. Motor vehicles/parts continues to be the bright spot as production rose 1.3% (month over month) and 7.2% (year over year). Capacity utilization was 78.2% and still remains below the 30-year average of 79.6% six years into a recovery. This also helps to explain why capital spending growth has been as modest as its been.

Bottom line, industrial production has fallen for five straight months, taking the Industrial Production Index to the lowest level since October. Mining, which makes up about 15% of this figure, is certainly a main factor but the Manufacturing Production Index is basically flat over the past five months.

The second quarter rebound from a likely first quarter contraction is fairly muted so far.

Bond yields have come in a tad since the IP release.

• From The Lindsey Group's Peter Boockvar:

The May NY manufacturing survey, the first May industrial figure to be released, rose to 3.1 from -1.2 in April. However, that was 2 pts less than expected and after averaging 8.2 in Q1 is averaging just 1.0 in Q2. After two months of contraction, new orders rebounded to still a very modest +3.9 from -6.0. Backlogs remained firmly negative at -11.5 but this component with the NY survey always seems to be negative and thus is nothing new. Shipments, which lag orders, were little changed. Employment slowed for a 2nd month to 5.2 from 9.6 in April and 18.6 in March. The 6 month average is 10.9. The average workweek was negative for a 2nd week. Inventories rose 5 pts to the most since June '14. Prices paid fell 10 pts after rising by 7 pts last month while prices received fell to the lowest since November. The overall business 6 month outlook fell 7 pts to 29.8 and is below the 6 month average of 35.1. Also, no traction was seen in capital spending plans as it fell to 15.6 from 24.5 and technology spending fell to 1.0, the lowest since February '14 from 16.0.

Bottom line, the NY Fed described today's figure as reflecting "slight expansion in business activity." Considering the likely negative print in Q1 GDP, this is not the Q2 rebound that many were hoping for. If the Atlanta Fed is correct with their Q2 GDP forecast of up .7% (just as they nailed the Q1 figure and their Q2 estimate is well below consensus), then we're looking at the potential for about zero growth in GDP in the first half of 2015. That's not a technical recession but it's pretty damn close. 

I continue to believe that the yield on the 10-year U.S. note has recently peaked (at 2.36%) and will likely move towards the 2.00% level during the summer months.

I expect the year-end yield will be somewhere between 2.35% and 2.50% (though precision of estimates is not intended, just the trend) and that over the next few years fixed-income yields will advance more rapidly.

As I have repeatedly written, I have expanded my closed-end municipal bond fund holdings dramatically.

I expect a 5% to 7% return (capital appreciation plus dividends) over the balance of the year -- far exceeding the projected return on equities (which I expect to be negative from current levels).

J.P. Morgan downgrades Deere (DE) shares to Underweight from Neutral with an $84 price target.

"I started to like blues, I guess, when I was about six or seven years old. There was something about it, because nobody else played that kind of music."

-- B.B. King

B.B. King died last night at 89 years old.

"The thrill is gone

The thrill is gone away

The thrill is gone baby

The thrill is gone away

You know you done me wrong baby

And you'll be sorry someday.

The thrill is gone

It's gone away from me

The thrill is gone baby

The thrill is gone away from me

Although I'll still live on

But so lonely I'll be."

-- B.B. King, The Thrill Is Gone

Certainly, the thrill is gone for the bearish cabal these days as Mr. Market continues to soar to new heights.

"The thrill may be gone today

But its not gone for good

The thrill may be gone today.

But it's not gone for good

Someday I know Mr. Market will be open armed baby

Just like I know a bad market should."

-- Doug Kass, Daily Diary