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All Rights Reserved, www.eqstrading.com
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
©
All Rights Reserved, www.eqstrading.com
Copyright © 2015 EQS Capital Management LLC 2 See important disclosure on last page
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.
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Copyright © 2015 EQS Capital Management LLC 3 See important disclosure on last page
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
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Copyright © 2015 EQS Capital Management LLC 4 See important disclosure on last page
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.
All Rights Reserved, www.eqstrading.com
Copyright © 2015 EQS Capital Management LLC 5 See important disclosure on last page
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.
All Rights Reserved, www.eqstrading.com
Copyright © 2015 EQS Capital Management LLC 6 See important disclosure on last page
EQS Trading
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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