newsletter 110215 final volume 1 issue 19

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Copyright © 2015 EQS Capital Management LLC 1 See important disclosure on last page

SIGNALS

Are you sick and tired of the FED talk yet?

For most people, yes, even economists in-

cluded, it is time to get on with it….raise

rates or keep them at 0%, just give us some

clear direction. It is time to get a real plan

and stop leaving the world in limbo.

The FMOC release on Wednesday was more

of the same as the FED keeps kicking the

can down the road. The market rightfully

priced about a 0% chance that the FED was

going to raise, and after the minutes re-

lease, the stock market crashed down, only

to make a “V” shaped recovery after the big

players knocked out investors and stop

losses all within an hour.

We talk about it all the time, the FED is in a

no win situation, and are backed into a cor-

ner. Wednesday’s press release again had

the following statement, “The Committee

anticipates that it will be appropriate to

raise the target range for the federal funds

rate when it has seen some further improve-

ment in the labor market and is reasonably

confident that inflation will move back to its

2 percent objective over the medium term.”

We have Yellen and other FMOC members

giving public statements that rates will rise

before the end of the year, and then we

have direct press releases from the FED that

wages and employment need to rise and inflation

needs to hit 2% before a hike will take place.

The next FMOC meeting is December 15-19, and we

live in a gigantic global economy and there is no way

that the American economy can “move on a dime”

and achieve the FED target objectives in the next 6

weeks. If the FED raises in December without meet-

ing the objectives that have been outlined since rates

hit zero, the FED will lose creditability. If the FED

does not raise rates in December then Yellen and the

individual FMOC members will lose credibility.

(continued on Page 2)

ANOTHER BLOWN OPPORTUNITY

-EQS Switched to a LONG Oil and Products Position on 10-30-15 and was rewared with a nice 1.63% on Friday

**You can achieve these results with discipline and by following the EQS daily trade recommendations and using the daily EQS Stop Loss guidance

I N S I D E T H I S I S S U E :

Blown Fed Continued 2

Oil and Products 3

Natural Gas 4

About EQS 5

Terms and Disclosures 6

E Q S T R A D E R E C O M M E N D A T I O N S

T H E S O U R C E

F O R C O M M O D I T Y

T R A D I N G S I G N A L S

Volume 1, Issue 19 November 2, 2015

A Weekly Publication on the Commodity Markets

©



We wrote an editorial back on April 29th, titled, “The FED Will Keep Rates Low for 2-5

More Years,” and at the time we were lampooned.

“If the FED does rise when will it be? June and July are out, there is no way that

we can hit Yellen’s inflation target by then. September or October? The markets are too

weak in the fall; this is traditionally when we have market crashes. We are already build-

ing up for a major equity reversal, if the market reverses before either meeting then she

can’t raise, and if the market has not crashed by then it will be painfully obvious that the

market will be correcting soon, and the last thing the FED wants on their hands is a mar-

ket crash shortly after a raise.

The next option is December….using some Economist “on the other hand” talk,

if equity markets make it to November without a major correction this is the meeting that

we could see Yellen call for an increase…. if Yellen does not raise at the December meet-

ing, we can’t get our inflation and GDP numbers to hit where we need and wean off the

QE and Bond Buying madness fast enough to start seeing a good Economic case to raise

the FED Funds Rate until 2020 or 2021. So here is some Economist logic for you, slim

chance for increase in Dec 2015…but most likely it is smooth sailing for rates.”

So all the way back in April we knew the FED was in a no win situation. We wrote of an

equity correction, and as expected the August dip in the stock markets put the FED on

their heels. With the markets down almost 10% for the September meeting, raising rates

could have fueled further falls in the market. The equity correction was short lived and

has since rallied back strong, but it was enough to make the FMOC pause and maintain

the course. Since the markets have mostly recovered, the September meeting would

have been an ideal time to raise, and now we go into December which would not end the

quarter and year well for people and businesses as they close out their books.

The FED blew an ideal opportunity in September. The range from the FMOC members is a

1-4% target rate by 2017 with general consensus of a 2.5% target. Since the FED missed

the opportunity on Wednesday, and with rates currently at a 0-0.25% target and the Fed

has 8 meetings next year, so then the Fed will have to hike at least every other meeting

next year to stay on track and that wouldn't give them room to skip a hike if anything con-

cerning remerged domestically or globally.

From an academic, economic, and bubble building standpoint, (we discussed growing

bubbles last week), we need to return to normalcy. From the economic health of Ameri-

can people and businesses we cannot digest normalized rates yet. Our editorial in April

was extreme calling for below historic rates until 2020 to

2021, but we are in uncharted territory. We are risking the

American economy becoming the Japanese economy of the

last 30 years of bad fiscal and monetary policy.

These are the facts, China and the world economy is slowing,

the rest of the world is using fiscal and monetary policy to

stimulate growth. On a side note, as the United States closes

in on $20 Trillion in government debt, every 0.25% increase in

yield to that debt puts an extra $50 Billion of burden on the

American tax payers, so though the FED maybe kicking the can

down the road they are saving the tax payers money right up

until the time that the policy starts costing a larger burden on

the economy than it is saving.

BL OW N FED…(C O N TIN U ED )

The FED blew an ideal opportunity in

September. The range from the

FMOC members is a 1-4% target rate by 2017 with gen-eral consensus of a

2.5% target.



After hitting a two-month low, crude oil roared back with a vengeance after Mexico's state-owned

Petrleos Mexicanos said it had received permission from the U.S. to import up to 75,000 barrels a

day of high-quality "light" crude starting in November. However there is a catch. While the

agreement is a step towards loosening the 40-year-old ban on oil exports from the U.S., it doesn't

reduce the amount of crude available because it is a swap. For every barrel of oil that is shipped

to Mexico, Pemex will send a barrel of a different crude-oil blend back to the U.S. The news sent

short-sellers scrambling to cover their positions, but has opened Pandora’s Box on things to

come.

Since we like to keep everything simple,

think back to Economics 101 again, as

prices go down consumers want more

and producers to produce less. The

example often used in college Economics

is pizza restaurants, as more restaurants

open the price of pizza goes down and

people buy more pizza when it is $5 than

when it is $20 per pizza, however at $5

some of the restaurants can no longer be

profitable and they shut down. We are

seeing our pizza example roll out right

now in oil. Oil futures continued to rally

after the Energy Information Administra-

tion said total crude and products de-

clined on the week. Stockpiles at the

trading hub of Cushing, Okla., fell 800,000 barrels last week and refineries are working more to

turn oil into consumer products, their utilization rising to 87.6% last week from 86.4% the week

before.

However, neither the Mex-

ico news nor the stockpile

data indicates that a global

glut of crude that spurred

last year's price collapse is

easing. Nothing has

changed and with OPEC/

Saudi Arabia still signaling

that they will stay firm on

their market share strategy

coming into the Dec 4

OPEC meeting. In addition

the majority of the global

economic data that has

been hitting the media

airwaves suggests that

global oil demand growth is

not going to be robust

enough going forward to

solve the oversupply situa-

tion. The global oil glut is likely to remain the main market feature well into 2016 unless Saudi

Arabia changes its strategy and moves OPEC back to being the swing producing region of the

world.

Whether it is pizza or oil, prices are set on reaching the equilibrium of supply and demand. The

long term forces are still fighting it out for true equilibrium, but in the short term with a continued

dovish FED, governments around the world are using every trick in the book to stimulate their

economies and record rebounds in equity markets we turn bullish. So for now we kick off the

month long oil and look to put a bit of this upside money in our pocket until it is time to go short

again as we fight for long term equilibrium.

C RU D E O I L : Kicking off the Month as a Bull

Oil and Refined Products

Oil futures

continued to rally

after the Energy

Information

Administration said

total crude and

products declined

on the week.

Bullish



Natural Gas briefly traded below the psychological

$2 level. It has been a topic of discussion in

many previous issues of “Signals” and though we

did not get a close below

$2 we finally dipped below

the mark intraday on the

prompt month contract.

After briefly trading below

the psychological $2 level

and reaching a 3-year low,

bargain buyers began to

pile in the market and

stock up for the winter.

After single down days of

almost 10% early in the

week, natural gas added

gains Thursday after a

smaller-than-expected

stockpile addition. The

U.S. Energy Information Administration said pro-

ducers added 63 billion cubic feet of natural gas

to storage in the week ended October 23rd; how-

ever it was still 5 bcf less than the average fore-

cast of 22 expected from analysts and traders

surveyed. The smaller-than-expected weekly

surplus adds ammunition for bulls who think the

oversupplied market could come into a better

balance by winter. Natural gas is used as the pri-

mary heating fuel in about half of U.S. house-

holds, and prices can rise rapidly when extreme

weather comes.

Though a cold snap could lead to a big rally, stock-

piles grew to 3.9 trillion cubic feet, which is 4.1%

above their five-year average level for this week of

the year and 12% above their level at this time a

year ago. At this pace, the market could set a

NATU RA L GA S… ANO TH ER FAILU R E

Bearish

Natural Gas

record of around 4 trillion cubic feet heading

into the winter heating season, analysts have

said. Those heavy stockpiles have played a

large role in the recent descent of gas. Many

forecasters are predicting a warmer-than-

normal winter, and tepid demand could leave

an unprecedented glut heading into the spring.

November will likely be off to a warm start, too,

according to weather reports that show above-

average temperatures widespread, with most

predicting the warm weather pattern to cover

half the country or more.

Bottom line, there is still very little demand

right now, and the weather continues to look

very mild and until this changes, all signs con-

tinue to point lower.

Bottom line, there is

still very little

demand right now,

and the weather

continues to look very

mild and until this

changes, all signs

continue to point

lower.



Why You Need EQS

From technical, to fundamentals, to macroeconomics, analyzing com-

modity markets can be a daunting task. Let EQS do the work for you.

Through its subscription service, EQS Trading provides traders and

hedgers easy to follow trading signals for major commodity futures mar-

kets, including crude oil, natural gas, gold, silver and many others. Now,

strategies used by institutions and hedge funds are at your fingertips.

The subscription service includes both daily trading signals and the

weekly Signals Newsletter, which provides in-depth insight to the com-

modity markets.

EQS Capital Management also offers a commodity hedge fund (EQS

Commodity Fund LLC), which employs the same signals in its subscrip-

tion service in a private placement fund for accredited investors and

institutions. Because EQS uses a “long” and “short” strategy, it is de-

signed to

generate

returns,

regardless

of which

way the

market is

moving.

EQS

Commod-

ity Fund

imbeds strict risk management principles through diversifying its portfolio

(energy, metals, and agriculture) and actively managing stop loss limits.

What is EQS?

Economic Quantitative Strategy (aka EQS) is an investment and trading

strategy that translates economic data and technical indicators into price

direction for

commodi-

ties. Be-

cause of its

quantitative

nature,

EQS has

been rigor-

ously back-

tested with

15 years of

historical

data to

ensure the

strategy works in a variety of market conditions. Furthermore, because

the global economy changes over time, EQS employs dynamic parame-

ters that evolve as the market changes.

About Us

Who is EQS?

Richard C. Rhodes

Mr. Richard C. Rhodes is the President and Founder of EQS Capital

Management LLC. Richard has a Bachelor of Science with honors in

Mechanical Engineering from Texas A&M University and an MBA

from Duke University. He brings almost 25 years of diverse energy

experience, covering all phases of the oil and natural gas value chain

from producer to end-user. Richard is a li-

censed Series 3 CTA (Commodity Trading

Advisor) with the Commodity Futures Trading

Commission and a member of the National

Futures Association.

Richard began his professional career on a

drilling rig in West Texas with Conoco Explo-

ration and Production. Richard continued his

oil and gas career with Koch Industries

(ranked as one of the largest privately-owned companies in the U.S.)

where he worked in midstream, refining, pipeline, and distribution

operations. During his eight years with Koch Industries, Richard be-

gan as an operations engineer and later found his true passion in

trading, which leveraged his professional interests in mathematics

and economics. Richard joined Duke Energy in 2002, where he spent

ten years working in the energy trading department and earned The

Pinnacle Award, the company’s highest honor. Richard then left Duke

Energy to launch EQS Capital Management in 2012.

Jonathan M. Lamb

Mr. Jonathan M. Lamb is the Director of Business Development at

EQS Trading. As a four year varsity hurdler

on the track team at Ball State University,

Jonathan earned Bachelor of Science de-

grees in Risk Management, Insurance, and

Economics, and started working on his PhD

in Economics at North Carolina State Uni-

versity before focusing on business and

trading.

As part of the first wave of Millennials to

join the work force, Jonathan started his

professional career almost 15 year ago,

joining ACES Power Marketing as an Operations Specialist, providing

demand side economics for Co-Op Power Providers before becoming

a Real-Time Electricity Power Trader. He continued his career trading

power for seven years with Progress Energy (now Duke Energy, the

largest utility in the nation) as a Senior Real Time Trader. Jonathan

then opted to become an entrepreneur and started a consulting firm

specializing in finance and economics, owning and running seven

different small businesses before joining EQS in 2015.



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Phone: 919.714.7453

www.EQStrading.com

E-mail: [email protected]

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PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. HYPOTHETICAL PERFORMANCE RE-SULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESEN-TATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMI-LAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPO-THETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RE-SULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HY-POTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN AD-VERSELY AFFECT ACTUAL TRADING RESULTS. THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THERE-FORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FI-NANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY INTEREST TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") REQUIRE THAT PROSPECTIVE CLIENTS OF A CTA RECEIVE A DISCLOSURE DOCUMENT WHEN THEY ARE SOLICITED TO ENTER INTO AN AGREEMENT WHEREBY THE CTA WILL DIRECT OR GUIDE THE CLIENT'S COMMODITY INTEREST TRADING AND THAT CERTAIN RISK FACTORS BE HIGHLIGHTED. YOU MAY REQUEST A COPY OF THE DISCLOSURE DOCUMENT BY EMAILING EQS. THE CFTC HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR ON THE ADEQUACY OR ACCURACY OF THE DIS-CLOSURE DOCUMENT. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIG-NIFICANT ASPECTS OF THE COMMODITY MARKETS. THEREFORE, YOU SHOULD PROCEED DIRECTLY TO THE DISCLOSURE DOCUMENT AND STUDY IT CAREFULLY TO DETERMINE WHETHER SUCH TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. EQS CAPITAL LLC IS A CFTC REGISTERED COMMODITY TRADING ADVISOR AND COMMODITY POOL OPERATOR. PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH POOLS WHOSE PARTICIPANTS ARE LIMITED TO QUALIFIED ELIGIBLE PERSONS, AN OFFERING MEMORANDUM FOR THIS POOL IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A FUND OR UPON THE ADEQUACY OR ACCURACY OF AN OFFERING MEMORANDUM. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT RE-VIEWED OR APPROVED THIS OFFERING OR ANY OFFERING MEMORANDUM FOR THIS FUND. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EX-CHANGE COMMISSION (THE “SEC”) OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS AS A

T H E S O U R C E

F O R C O M M O D I T Y

T R A D I N G S I G N A L S

TERMS and DISCLOSURES

newsletter 110215 final volume 1 issue 19

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