newsletter 102615 final volume 1 issue 18

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SIGNALS

While there maybe 497 S&P companies that

have exposure to China’s 6.9% GDP growth,

there are 3 that certainly do not. Google

(Alphabet), Amazon and Microsoft all report-

ed fantastic earnings on Thursday. Those

three companies alone gained $100Bn in

market cap from the closing on Thursday to

the opening on Friday.

It feels good to cheer on the bulls for a

change!

Amazon earned $0.17 per $564 share and

the stock jumped $55 on that news. Based

on an EPS of $0.17 Amazon was priced at

3,317 times earnings before the news, and

on the news they added a staggering addi-

tional 323 times earnings! Based on Fri-

day’s opening stock pric-

es , if Google had Amazons

valuation it would be trad-

ing at $18,000 per share

with their $30 in earnings.

Apple would $6,000 with

their $10 earnings per

share, and with $3 per

share earnings Microsoft

stock would be $1,800 per

share!

It would seem that we are

not cheering on bulls, but

cheering on unicorns!

Lots of sectors and companies are priced at crazy

valuations, the tech sector, pharmaceuticals, and bio

-tech to name a few. Low rates and stimulus is not

directly causing big valuations, what low rates and

stimulus are doing is indirectly fueling bubble build-

ing. Cheap money has to go somewhere, and that

money is chasing growth and yield, and that is not

only causing bubbles, but causing them to grow. This

is not new stuff, Isaac Newton published his laws of

motion in 1686, and just like the 3rd law states, forc-

es cause an equal and opposite reaction. Just like

the law, there is an opposite force, and low rates and

stimulus just so happens to have a reaction of build-

ing extreme bubble valuations in unintended areas.

(continued on Page 2)

L IFE WITH THE NASDAQ @ 5K

EQS is now up 16.79% across the energy sector for 2015!

**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 :

NASDAQ Cont. 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 18 October, 262015

A Weekly Publication on the Commodity Markets

©



This is the no-win bubble trap the Fed is caught in. Why, and how can the Fed raise

rates when the rest of the world is looking for ways to stimulate growth? Europe is pre-

pared to do whatever is necessary to keep the economic machine chugging along. Mar-

io Draghi, the President of the European Central Bank signaled Thursday that the bank

is prepared to undertake another large stimulus package that could include more bond

purchases and a cut to the already negative deposit rate, as Europe continues to strug-

gle with ultralow inflation and a tepid recovery. The finger pointing for global slowdown

keeps coming back to China. How can China be the problem when their GDP is growing

at staggering clip of 6.9%.

Almost any economy in the world would be thrilled to have 6.9% growth as even the

strongest countries are struggling to achieve 3% growth rates. If China is growing at

6.9% then why is the Fed and the ECB concerned with Chinese markets? Why is Ger-

many lowering their own GDP forecast to 1.7% citing China weakness when China is

growing at 6.9%? Why have South Korea’s exports dropped 8.4% when China is grow-

ing at 6.9? Why is Japan facing yet another recession if China’s GDP is growing at

6.9%? The real question is if China’s GDP is growing at 6.9% why did the People’s Bank

of China cut rates 0.25 point and reserve requirements 50 to 100 basis points on Fri-

day?

Sarcasm aside, China is not growing at 6.9%. Regardless of crazy stock valuations,

there are many companies that are doing very well. The American automotive sector is

doing very well, and from Apple to Amazon, the technology sector is doing well. Cheap

money is fueling a rally and building a bubble of companies and sectors actually where

there is a remote hope of earnings growth. The problem is that there only seems to be

very white hot bright spots and very dark spots in the market right now.

Many have never recovered from the financial crisis, and that along with whatever the

true numbers are in China has slowed consumption which has slowed manufacturing,

which has slowed commodity demand. We are throwing stimulus at the market in

hopes that the dark sports turn light, but in reality all we are doing is making those

bright spots burn hotter.

The chances are now near 0% that the Fed will raise rates at the FMOC meeting on

October 27th-28th. Big rallies in equity markets and valuations in many sectors are now

eerily reminiscent to the Dot-Com bubble levels at the end of the 90s and early 2000’s.

Since low rates are fueling bubbles, a rate hike could just be the medicine that is need-

ed to calm down valuations.

It would seem that no measure of stimulus is going to help beat-down sectors like man-

ufacturing and commodities, so the great debate continues. If stimulus is not working

where it is needed, and it is building unintended bubbles in other areas, when and how

do you return to normalization without major economic consequences?

NASDAQ R A LLY…(C O NT I N U E D )

This is the no-win bubble

trap the Fed is caught in. Why,

and how can the Fed raise

rates when the rest of the

world is look-ing for ways to

stimulate growth?



Equities around the world maybe rallying, but oil is bucking the trend. Oil has been highly correlat-

ed for years to equity prices, and as stocks have been rallying so has oil. The oil and stock corre-

lation has been weakening over the last year as investors are finally realizing that cheap oil is

good for consumers, and that equity rallies in stocks due to fiscal and monetary policy have no

real connection to the economics of oil supply and demand.

October has been a prime example as oil prices

fell to three-week lows as U.S. inventory data

showed a big build in crude inventories. The

U.S. Energy Information Administration reported

Wednesday that domestic crude oil inventories

expanded by eight million barrels the previous

week, well more than analysts had expected.

Total stockpiles of crude oil and refined prod-

ucts in the U.S. are at an all-time high, adding

further pressure to the already oversupplied

global market, of which no amount of govern-

ment stimulus or artificially low interest rates

can fix.

The one thing that had been fueling rallies

since prices crashed under $40 in late August

was the continued decline in North American

rig counts. The latest EIA report killed any

hope of a bull rally as the data showed that

U.S. production was unchanged from the prior

week. Domestic output has started falling in

recent months as producers have cut spend-

ing in response to low prices. The U.S. produc-

es around nine million barrels a day of crude

oil, down from 9.6 million barrels a day in

April, but still well above demand. The num-

ber of rigs drilling for oil in the U.S., which is

an indicator of future production, has fallen

sharply this year, however the bulls are starting

to realize any increase in prices will just bring

marginal rigs back online and push up supply.

Also weighing on prices last week was a strong

boost in the dollar. On Thursday, the dollar rose

against the euro after the European Central

Bank indicated it would consider further stimu-

lus measures. And then on Friday, China cut

their interest rates in a surprise move aimed to

boost its economy. A stronger dollar makes oil,

which is priced in dollars, more expensive for

foreign buyers. This consequently dampens

demand globally for oil.

A bright spot this week was that demand continues to remain healthy. Globally, low prices this

year have pushed oil demand growth to the fastest rate in five years, according to the Internation-

al Energy Agency, however stockpiles are high and there is ample slack in production to bring rigs

quickly online should prices make marginal rigs profitable.

C RU D E O I L : L O O K OU T B E L OW

Oil and Refined Products

A stronger dollar

makes oil, which is

priced in dollars,

more expensive for

foreign buyers.

This consequently

dampens demand

globally for oil.

Bearish



The Natural Gas market is one of the last true

supply and demand markets that closely trade

with true supply and demand fundamentals.

Heating and Cooling is the major use of Natural

Gas whether through power production or home

HVAC use. Extreme and unseasonably hot and

cold weather typically provides a nice rally to Nat-

ural Gas prices, but the October cold snap has

thrown that rule out the window.

This past week, natural gas prices once again

failed to settle above the key resistance line EQS

has mentioned in numerous past Signal’s publica-

tions. The failure has caused NG to fall to three-

year lows as expectations of continued weak de-

mand outweighed a smaller-than-expected inven-

tory build. Prices initially rose by two cents after

the EIA released the weekly data however, the

market quickly gave up those gains and settled

NATU RA L GA S… ANO TH ER FAILU R E

Bearish

Natural Gas

down to the lowest settlement since June 13,

2012.

The U.S. Energy Information Administration said

Thursday that inventories grew by 81 billion

cubic feet last week, less than the 87-bcf build

that analysts expected. Even so, the market

remains oversupplied, as stockpiles remain

nearly 13% above their levels of a year ago and

about 4.5% above the five-year average.

Inventories typically rise at this time of year as

producers stock up the

heating fuel ahead of the

winter, when consumption

rises. The so-called injec-

tion season typically ends

at the end of October, and

consumers then draw natu-

ral gas out of storage to

use for indoor heating

through the end of March.

This year, forecasts for

warmer-than-normal weath-

er in the coming weeks

have traders concerned

that stockpiles will contin-

ue to build longer than

normal this year, pushing

the already oversupplied

market into a deeper glut.

With increased pipeline capacity brought on this

year, the October cold snap did not cause any

pinch points in moving gas and could be a very

bearish sign for things to come in the winter of

‘15/’16 natural gas market.

Extreme and

unseasonably hot and

cold weather typically

provide a nice rally to

Natural Gas prices,

but the October cold

snap has thrown that

rule out the window.



Why You Need EQS

From technical to fundamentals to macroeconomics, analyzing commodi-

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

Through its subscription service, EQS Trading provides traders and

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The subscription service includes both daily trading signals and the

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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 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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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 102615 final volume 1 issue 18

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