newsletter 090705 final volume 1 issue 11

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

All rights reserved. 1 www.eqstrading.com

SIGNALS

Labor Day used to mark the end of summer,

the time kids went back to school, and when

we welcomed cool, crisp autumn weather

after months of heat and humidity. Well,

Labor Day may mark the end of summer,

but don’t expect it to signal the end of the

heat of market volatility this year. We have

been talking

about it for

months. Uncer-

tainty drives fear

and fear drives

volatility. Uncer-

tainty is so ex-

treme at this

point that market

volatility is start-

ing to feel normal.

China, the Fed,

commodities, and

equities are not

only making the

markets nervous,

but these things

are also starting

to make the

“ordinary” popula-

tion nervous. Bill Gross, the PIMCO turned

Janus management king, with close to $200

billion under management, was quoted last

Wednesday when asked for his current view

on the market, "Cash or better yet 'near

cash' such as 1-2 year corporate bonds are

my best idea of appropriate risks/reward

investments," Gross said. "The reward is not

much, but as Will Rogers once said during the Great

Depression – "I'm not so much concerned about the

return on my money as the return of my money." The

statement from the bond king himself created a bit of

a buzz in the financial world as many analysts are

concerned that Gross is echoing the sediment of

“ordinary” people and that the “market” will be hit

further as “ordinary” peo-

ple soon tire of volatility

and ramp up redemp-

tions in the markets and

move away from risk.

To zero in on uncertainty,

we need to keep beating

the two dead horses that

we have been talking

about for months— China

and if or when the U.S.

Fed is going to increase

rates.

While the world watched

Greece back in June, we

watched China and have

not stopped. The world is

still asking the question,

is China in a recession?

Is China heading for a recession? Uncertainty around

the Chinese data again caused fear in the world mar-

kets, but the world was given some time to relax last

week as the Chinese markets were closed on Thurs-

day and Friday for their 70th anniversary parade and

celebration of their “defeat” of “Japanese Aggres-

sion” (World War II).

(Continued on Page 2)

Good Bye Summer, Hello Volatility Heat Wave

EQS short positions have gained an average of 23% since their entry!

**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 :

Volatility 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 11 September, 7 2015

A Weekly Publication on the Commodity Markets

©

Commodity SymbolCurrent

Position

Entry

Date

Entry

PriceStoploss

Current

Position Return

MTD

Return

YTD

Return

Average 5-Year

Annual Return

Average 10-Year

Annual Return

Sharpe

Ratio

Max Draw

Down

WTI Crude Oil CLV15 Short 7/13/2015 52.78$ 1.75% 27.53% 5.78% 14.54% 34.37% 36.09% 3.92 -31.00%

Brent Crude Oil EBV15 Short 7/13/2015 58.61$ 1.70% 24.19% 7.05% 32.91% 35.05% 45.92% 1.30 -30.44%

Diesel HOV15 Short 7/13/2015 1.7360$ 1.60% 21.38% 5.52% 42.93% 25.21% 34.18% 1.51 -30.42%

Gasoline RBV15 Short 7/13/2015 2.0451$ 2.45% 32.16% 2.35% 37.59% 35.27% 52.35% 1.74 -31.34%

Natural Gas NGV15 Short 8/17/2015 2.801$ 1.10% 8.11% 2.88% 0.04% 61.24% 83.92% 1.30 -38.24%

This performance is simulated using corresponding stop loss recommendations. No leverage used on these results.

Refer to important disclosures on the EQS Trading (www.eqstrading.com) website.

http://eqstrading.com/eqstrading.com/Weekly_Publications/Entries/2015/6/29_Weekly_Newsletter_Volume_1_Issue_1.html





Leading up to the parade, China grabbed headlines as they arrested short sellers, and brought

in fund managers for “questioning” that have yet to be heard from or seen by their families. The

actions of the government and the showing of mass military strength that was on display at the

celebration parade would seem to be the actions of a government that is not afraid of western

powers, but more so of an uprising of their own people. A not too far outlandish conclusion is

that the Chinese government knows there are real domestic problems and by hiding behind

“national pride”, the Communist Party is making Japanese people and stock market

“manipulators” the scapegoats to calm citizens and keep any ideas of revolution firmly in check.

The strong anti-Japanese aggression is nothing new from China, but the two countries have very

close ties and are large trading partners. Japan has its full debt crisis to worry about. The Japa-

nese economy has been fighting stagflation, weakening GDP, mounting debt, and an aging pop-

ulation; an act of aggression, trading or otherwise, could be the preverbal straw that breaks the

camel’s

back in

regards

to Japan.

Since

China

took a

two day

national

holiday,

uncer-

tainty

was

turned

back to

the Fed. The uncertainty has now swung from discussion about increasing rates in September,

to starting another round of QE. The central problem however remains not the action, but the

uncertainty of the action. As we said a few weeks ago, The Fed Can’t Win and until the market

knows what the Fed is going to do; we are going to see continued volatility.

The market is still split on the Fed move that is now less than two weeks away. The release of

the Fed’s Beige Book on Wednesday showed that the American economy is still plowing along,

and the jobs data that was released was not bad or good, but does show that the American

economy is still plowing along. The problem is not the data, but the uncertainty of the data. If

we had great data, we would know the Fed was going to raise rates, and had the data been bad,

we would have known that rates would not only stay at zero, but that we may also be looking at

another round of QE. So the problem is not the numbers, but the uncertainty of what the Fed is

going to do with the numbers.

It may be cooling down, but volatility is only starting to heat up. Is China heading for a hard

landing? Is the Fed going to raise rates? Oh, yeah, and by the way, can Europe dig out of their

hole, and could it take a straw to break the back of Japan? These questions and more are all

pointing to a very hot autumn.

VO L ATI L I TY HEAT WAV E . . . (CO N T . )

Gross said. "The

reward is not much, but

as Will Rogers once said

during the Great

Depression – "I'm not

so much concerned about

the return on my money

as the return of my

money."




The last few weeks have been a roller coaster ride for oil! Oil traded as low as $37.75/bbl and as high as

$49.33/bbl. In just 3 days, oil jumped 27.5%, its largest three-day move in 25 years, since the Iraqi Inva-

sion in Kuwait. As we consider oil’s next move, let’s review what some industry experts have said about oil

during the past 12 months…

Stephen Schork: Will be confident of oil bottom when prices are $0/bbl (12/2014)

T. Boone Pickens: A Return to $100/bbl in 12-18 months (12/2014)

T. Boone Pickens: Oil is going higher - $70/bbl by end of year (8/2015)

Hofmeister (former President of Shell): Oil will rebound to above $80/bbl later this year (1/2015)

Barron’s: Time to Buy Energy (8/8/2015)

Barron’s: Oil prices are headed toward $20/bbl (8/17/2015)

John Kilduff (CNBC contributor): Crude could drop into the mid-20s (8/20/2015)

One thing for sure is there is a lot of uncer-

tainty out there! When uncertainty hits,

it’s best to lean back and examine what

the data is telling you, as data never lies.

As discussed during last week’s Signals,

there was more than just short covering

that ignited the recent rebound. First, US

GDP was revised upward to 3.7% which

equates to a more robust demand outlook

for energy. Second, in its monthly report,

the EIA revised down its oil production

figures for June by 100,000 bpd. Finally,

OPEC mentioned it might be open to pro-

duction cuts along with Russia engaged in

the discussion. Investors have been wait-

ing for a time to buy and the convergence

of these events was just too good of an

opportunity to pass up. The WSJ reported that private equity firms recently doubled-downed their invest-

ments in energy and during the past 6 months, ETN, a popular triple leveraged long oil ETF, had $1.2 billion

in investor inflows during the past 6 months.

The jury is still out whether oil prices are free

and clear of further pain. Despite a plateau

appearing in production, US crude and product

inventories reached another all-time high. Fur-

thermore, China’s growth concerns bring into

question the global demand outlook for oil de-

mand. Finally, this past week, refinery utiliza-

tion fell as the US is entering the fall refinery

maintenance period whereby the demand for

crude will be lower.

So with the recent price rally, is now the time to

increase long exposure in oil? Not yet! In fact,

EQS recommends to continue shorting crude.

Too many bearish factors remain and invento-

ries are still increasing at such a rapid pace

that the oil glut is worsening. Yes, production

was revised down in June and inventories brief-

ly declined in June as a result (See chart), but look what happened after this—- Since June, inventories have

continued to sore to new highs week after week! Therefore, the data tells you that more production declines

(or improved demand) are needed to balance supply with demand. For those out there eager for long expo-

sure, wait to see if oil settles above $47.60, as this could be a sign that oil prices have reached an inflection

point. Other catalysts that could quickly solidify bullish sentiment would be an announcement from OPEC to

hold an emergency meeting or the Fed signaling QE4.

After the Rally… Is Now the Time to Go Long Oil?

Oil and Refined Products

Bearish

The recent downward

revision in crude

production for June is

not enough to solve the

supply glut as inventories

continue to reach new

highs.

1,000,000

1,050,000

1,100,000

1,150,000

1,200,000

1,250,000

1,300,000

1,350,000

J F M A M J J A S O N D

Ba

rre

ls (

Th

ou

sa

nd

s)

US Petroleum Inventories

5-Year Range

Average 5-Year

2012

2013

2014

2015





When is natural gas going to break out of its

range? During 2015, the market has continued to

oscillate between $2.50-$3.00/mmbtu. In past

issues of Signals, we have discussed many long-

term catalysts that could break natural gas prices

out to the upside. These include increased natu-

ral gas power generation demand as a result of

coal and oil plant retirements or fuel switching

along with the potential for the US to increase

exports through the number of

LNG projects expected to come

online soon.

However, strong production and

efficiency gains from drilling are

keeping inventories well above the

5-year average. By the end of

September, many analysts esti-

mate that total US storage will be

testing record levels. During its

latest report, the U.S. Energy In-

formation Administration reported

that supplies of natural gas rose

94 billion cubic feet for the week

ended Aug. 28. Analysts polled by

Platts forecast a climb of between

83 billion cubic feet and 87 billion

cubic feet. The EIA, however, said

the latest data included

"reclassifications" from base gas to

working gas that resulted in in-

R A N G E B O U N D N A T U R A L G A S … W H E N W I L L I T E N D ?

Bearish

Natural Gas

creased working gas stocks of about 8 billion

cubic feet in the East region. Total stocks now

stand at 3.193 trillion cubic feet, which is an

increase of 495 billion cubic feet from a year

ago and 122 billion cubic feet above the five-

year average, the

government said.

Another bearish clue

is the outlook for

industrial natural gas

demand, which has

softened since the

latest ISM came in

lower than expected

at 51.1, signaling the

slowest rate of

growth for the factory

sector since May of

2013. This leaves

demand for power

generation and alt-

hough natural gas

will be increasing its

market share, the fall

shoulder season is

upon us, whereby

power demand will

dramatically drop off. So at least for now, stay

short as the near-term fundamentals of natural

gas paint a rather bearish picture.

The latest ISM came

in at 51.1, signaling

the slowest growth

rate for the factory

sector since May of

2013.

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

30.00

35.00

40.00

45.00

50.00

55.00

60.00

65.00

Jan

-20

03

Jul-

20

03

Jan

-20

04

Jul-

20

04

Jan

-20

05

Jul-

20

05

Jan

-20

06

Jul-

20

06

Jan

-20

07

Jul-

20

07

Jan

-20

08

Jul-

20

08

Jan

-20

09

Jul-

20

09

Jan

-20

10

Jul-

20

10

Jan

-20

11

Jul-

20

11

Jan

-20

12

Jul-

20

12

Jan

-20

13

Jul-

20

13

Jan

-20

14

Jul-

20

14

Jan

-20

15

Jul-

20

15

ISM Industrial Demand (YOY 3mma)

ISM Index vs NG Industrial Demand

In a Range… Natural Gas Prices




Why You Need EQS

From technicals 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-

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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

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returns,

regardless

of which

way the

market is

moving.

EQS

Commodi-

ty 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-

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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 licensed

Series 3 CTA (Commodity Trading Advisor) with

the Commodity Futures Trading Commission

and a member of the National Futures Associa-

tion.

Richard started his professional career on a

drilling rig in West Texas with Conoco Explora-

tion 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 mid-

stream, refining, pipeline, and distribution operations. During his eight

years with Koch Industries, Richard began as an operations engineer

and later found his true passion in trading, which leveraged his pro-

fessional interests in mathematics and economics. Richard joined

Duke Energy in 2002 (the largest utility in the nation), 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 Univer-

sity before focusing on business and trading.

As part of the first wave of Millennials to join

the work force, Jonathan started his profes-

sional career almost 15 year ago, joining

ACES Power Marketing as an Operations Specialist, providing de-

mand 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.



EQS Trading

A Division of EQS Capital Management, LLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

Phone: 919.714.7453

www.EQStrading.com

E-mail: [email protected]

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In no event will EQS, its affiliates, nor any of its officers, partners or employees be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of it, or in any connection with, your use of the Subscrip-tion or the failure of performance, error, omission, interruption, delay in operation or transmis-sion. Use of the Subscription Service shall be governed by all applicable Federal laws of the United States of America and the laws of the State of Delaware. The user hereby acknowledges and agrees that EQS may be harmed irreparably by any violation of this Agreement and that EQS shall be entitled to injunctive relief to enforce this Agreement. The information contained has been prepared solely for informational purposes and is not an offer to sell or purchase or a solici-tation of an offer to sell or purchase any interests or shares in funds managed by EQS. Any such offer will be made only pursuant to an offering memorandum and the documents relating thereto describing such securities. 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 PRIVATE PLACEMENT MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-FENSE.

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 090705 final volume 1 issue 11

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