The Draghi ECB Show

Bloomberg -- Draghi Takes ECB Deposit Rate Negative in Historic Move

FT -- ECB cuts deposit rate below zero

Central bank hopes historic move will help to avert deflation

Marketwatch -- ECB cuts rates, is charging banks to hold their cash

Zero Hedge -- NIRP Has Arrived: Europe Officially Enters The "Monetary Twilight Zone"

Somehow the ECB believes that cutting its Main Refinancing Rate by 10 bps to 0.15%, its Marginal lending facility Rate by 35 bps to 0.40%, and its Deposit facility rate by 10 bps to -0.10% will help avert deflation.

Actually, the best word for it, courtesy of the FT, is hope. They hope it will avert deflation.

To avert deflation, they have to expand lending to increase loan growth. That's how it works in a credit-based system. Charging banks for their deposits will merely cause the banks to take delivery of the deposits and hold them in their vaults -- their cement mattresses. If the banks charge their depositors for holding cash, depositors will stuff their own mattresses. The ECB cannot force banks to lend, nor can it force people to borrow.

So basically the ECB has done nothing, and can do nothing.

Closing above the 1925.88 yesterday -- exactly two point higher at 1927.88, haha -- the S&P has opened the door to the 1950 Fib zone, but it feels primed for a hiccup.

Futures made a bottom at 1924 just after the ECB decision that should hold unless Draghi says something nutty during the ECB 8:30am EST press conference.

I have waited to buy puts and will be looking for an opportunity today and tomorrow, but there could be some wrong-footed surprises for all the previous put buyers. The markets will need to open in order to assess whether the surprises might be temporary.