* Mario Draghi of the ECB sent shockwaves through the foreign exchange and currency markets today

* He didn't deliver the stimulus traders expected

* The big question is, will Janet Yellen surprise the market by failing to raise rates?

* The ECB did slightly lower interest rates, and extended QE if it will be needed

* Draghi's goal is inflation

* He equates 2% inflation to "price stability", when prices in Europe are stable now

* The big divergence that everybody is trading on a tightening in the U.S. at the same time Europe continues to ease

* The reality is more likely to be the reverse

* If anything, the European recovery is just getting started, and the U.S. recession is just getting started

* As a result of Draghi's decision to hold off on stimulus, the euro was up more than 3% on the day

* The dollar was weak across the board

* The stock market, including the DAX, fell accordingly

* Both U.S. stocks and bonds experienced a selloff

* Cheap money has been fueling rallies all over the world and when the ECB did not deliver it triggered a selloff in the U.S. assets

* The Dow rallied over 2000 points off its September low based on rate hike expectations that did not materialize

* We also got a key reversal in gold

* Overnight it made a new low, but closed substantially above that level

* The euro is still weak, it is just not as weak as the market expected

* The best environment for gold when the weakest currency is the dollar

* I wanted to address Janet Yellen's testimony today responding to questions

* Yesterday, Yellen referred to Q4 GDP forecast consensus as 2-1/2%

* She did not even realize that on that same day the Atlanta Fed reduced their forecast down to 1.4%

* I think the real shocker will be that the Europea Q4 GDP will realize greater growth than the U.S.

* Yellen was asked about Citibank's recent projection that the U.S. will experience a recession in 2016

* Obviously, she can't agree with the projection, as this runs contrary to the Fed's rhetoric

* Asked as a followup, what tools the Fed would use in the event we did experience a recession in 2016, Yellen responded that the Fed would all the tools it has always had

* She said, if we did raise rates, then we would lower them

* Plus, she said it could use the asset purchase program (QE) that "has worked so well in the past

* If QE worked so well in the past, we would not experience a recession in 2016

* You can't call QE a success until rates are normalized and the balance sheet shrinks back down to pre-crash levels

* If the Fed finds that it has to launch QE4 in 2016 because it failed to reach "escape velocity"

* How many QE's does the Fed have to initiate before it admits that it doesn't work, and is actually impossible to end without a great deal of pain?

* This loss of credibility in the Fed will precipitate a dollar crisis

* Anther thing that was ignored by Janet Yellen and the press was the six-year low in the ISM number

* The market is focusing on the service sector, yet the most important jobs are the goods producing jobs

* Lat month, we got a higher than expected jump in the non-manufacturing number:59.1

* This month we wend all the way down to 55.9, which is dangerously close to contraction

* If we get the service and the manufacturing sectors both in contraction, that will be a total recession, supporting Citibank's 65% probability forecast may look optimistic

* Since 2016 is an election year, a recession will not bode well for the Democrats' economic success narrative


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