newsletter 111615 final volume 1 issue 21

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SIGNALS

The November 6th job report was a home-

run! Or was it?

The headline number smashed expectations

of creating 271,000 jobs, nearly double the

142,000 September job number, and well

above the 175,000 to 190,000 expected.

The big job gain continued Wall Street’s

pattern of what is good is bad, and what is

bad is good. The headline number out of

the gate was a great number, which spurred

selling across the commodity sector and in

all equites except for the financials as the

automatic assumption now is that the FED

will be raising rates in December. As the

market continues to be “fed up with the

FED,” no matter what happens in market

will likely not be received well.

The FED continues to target infla-

tion above 2% and “strong” wage

growth and employment as the key

factors in raising rates to “return to

normalcy.” The FED has not raised

rates for over 9 years, so what is

“normal”? Low rates are the new

normal, and as we have seen the

market is not going to let rates go

up without a fight. The question

that remains, “Is December the

right time?”.

The problem with the jobs data is

that once you lift the hood and

look around the headline number is not that good.

Though 271,000 is a big number, the high paying

breadwinner jobs still have not recovered from the

recession. The reported number of high paying jobs

in mining, energy and manufacturing declined by

4,000, while the count of low-pay, part-time waiters

and bartenders gained 41,000.

The “Leisure and Hospitality” category of the jobs

survey is somewhat broader as it also includes bell-

hops, hotel maids, parking attendants, hot dog ven-

dors, stadium maintenance crews and the rest of the

lodging and entertainment complex. These are all

worthy and necessary endeavors, but they are mostly

gigs, not jobs. During October the average workweek

in Leisure and Hospitality was just 26.3 hours.

(continued on Page 2)

271,000 REAL JOBS?

Current EQS Short Recom-mendations have gained an average of 11%!

**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 :

Jobs 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 21 November 16, 2015

A Weekly Publication on the Commodity Markets

©

Commodity SymbolCurrent

PositionEntry 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 CLZ15 Short 11/6/2015 45.20$ 1.89% 8.59% 6.44% 16.42% 54.68% 60.62% 3.54 -26.86%

Brent Crude Oil EBZ15 Short 11/6/2015 47.98$ 2.50% 9.40% 10.36% 63.05% 39.19% 46.24% 1.16 -32.69%

Diesel HOZ15 Short 11/6/2015 1.4872$ 2.00% 6.75% 6.54% 66.72% 32.56% 33.62% 1.42 -40.94%

Gasoline RBZ15 Short 11/6/2015 1.3610$ 2.45% 6.17% -1.41% 23.23% 31.67% 44.24% 1.03 -31.39%

Natural Gas NGZ15 Short 10/3/2015 2.689$ 3.70% 24.35% -0.65% 10.20% 56.73% 75.42% 1.22 -35.72%

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.



In the “Leisure and Hospitality” category the average gross earnings are $380 per week compared to $1,035 in manufacturing, $1,385 in

mining and energy and $1,604 in the utilities category. On an annualized basis we have losses in the breadwinner sector of jobs that aver-

age $83K, while we rack up big gains in leisure and hospitality where the weekly rate annualizes to $19k or around 60-75% less than bread

winner jobs.

Not to sound like the government or media is in on a big conspiracy, but numbers and statistics can be very misleading if you really don’t dig

into them. Paul Roberts wrote an article last week that looked at the true numbers, and confirms what we have been talking about for

months, and it raises some very interesting points.

“What is wrong with these numbers? Just about everything.” First of all, 145,000 of the jobs, or 54%, are jobs arbitrarily added to the num-

ber by the birth-death model. The birth-death model provides an estimate of the net amount of unreported jobs lost to business closings

and the unreported jobs created by new business openings. The model is based on a normally functioning economy unlike the one of the

past seven years and thus overestimates the number of jobs from new business and underestimates the losses from closures. If we elimi-

nate the birth-death model’s contribution, new jobs were 126,000.

Next, consider who got the 271,000 reported jobs. According to the Bureau of Labor Statistics, all of the new jobs plus some 378,000 went

to those 55 years of age and older. However, males in the prime working age, 25 to 54 years of age, lost 119,000 jobs. What seems to have

happened is that full time jobs were replaced with part time jobs for retirees. Multiple job holders increased by 109,000 in October, an indi-

cation that people who lost full time jobs had to take two or more part time jobs in order to make ends meet.

Now assume the 271,000 reported jobs in October is the real number, and not 126,000 or less, where are those jobs? According to the

BLS not a single one is in manufacturing. The jobs are in personal services, mainly lowly paid jobs such as retail clerks, ambulatory health

care service jobs, temporary help, and waitresses and bartenders.

For example, the BLS reports 44,000 new retail trade jobs, a questionable number in light of sluggish real retail sales. Possibly what is hap-

pening is that stores are turning a smaller number of full time jobs into a larger number of part time jobs in order to avoid benefit costs as-

sociated with full time workers.”

Not only is the true jobs number much “uglier” than the headline build, but consider that 94.5 million people have dropped out of the work

force, giving us the lowest labor force participation rate since the recession of the 1970s after many females entered what was a historical

male driven work force.

When you dig a bit deeper the numbers start to make a bit more sense

as naturally people are picking up part-time and second jobs to cover

breadwinner losses. The next thing that also begins to make sense is

the rapid growth of consumer driven borrowing.

The Federal Reserve’s credit numbers showed American consumers

borrowed at an all-time record of $28.9 billion in September, besting

the previous high-water mark set in November 2001.

The FED has always been very concerned about consumer credit, as

the image goes, the FED wants “take away the punch bowl” from the

party before it gets out of hand, and the best way to do that is to raise

rates. In the past borrowing has set up bubbles, but if you look again

at these numbers, the recent surge has essentially been driven by car and student loans, which increased by more than $22 billion, with

revolving debt increasing by $6.7 billion.

The economy is getting better; even if job growth is at the low end, consumers have been putting off purchases of things they need, such as

replacing cars that have been having differed maintenance since before the recession (auto sales have been spectacular this year), and

they are going to school to get an education to help move away from low end jobs to breadwinner jobs. Raising rates is not going to stop a

credit party that is flowing with prime cuts of steak, lobster tail, and fine wine, but it is going to cut into a party made up of Hamburger Help-

er and fish sticks.

We beat-up on the FED all the time, and it is not like the FED doesn’t lift the hood and think about these issues, which is why we keep say-

ing that there is no right or wrong answer with regard to rate policy. At this point the only right answer is one that gives clear direction to the

market. The right answer is not higher or lower rates, but certainty. Regardless if the jobs number was good or bad, we need to start morn-

ing moving forward or backward, which would be a pleasant change from the aimless wandering path we have been on.

SPO OFI N G…(C O N TI NU ED )



Oil prices fell last week to their lowest levels since August as U.S. inventory data showed a sev-

enth straight increase in U.S. supplies. It was not just supply that contributed to the dip, but the

demand side is also weakening as fears of global economic issues were front and center as the

case for a FED rate hike in December heats up.

“The supply overhang, which

showed an increase of 4.2 mil-

lion barrels in crude supplies,

remain near levels not seen for

this time of year in at least the

last 80 years”, the Energy Infor-

mation Administration said.

Analysts had expected an in-

crease of 1.1 million barrels as

total supplies of crude oil and

refined products however rose

2.6 million barrels to 1.3 billion

barrels, also near all-time highs.

At the Cushing Oklahoma stor-

age hub and the delivery point

for NYMEX futures, stockpiles

rose by more than 2 million

barrels.

The EIA estimated that production rose by 25,000

barrels a day last week to 9.2 million barrels a day.

With large spending cuts and layoffs in the oil

patch, traders and analysts have been expecting

output decline much faster than the numbers have

been showing. It appears that the cuts have been

making producers more efficient which have al-

lowed what was uneconomical to pump this time

last year to become economic.

Crude supplies typically fall at this time of year as

refiners’ complete seasonal maintenance and start

processing more crude oil into refined products. Refineries did process more crude last week

than the week before, but crude stockpiles still grew because imports and production also rose.

As refineries return from maintenance in the coming weeks, crude-oil stockpiles could fall but

inventories of refined products could grow. Refinery maintenance season is

drawing to a close and refined product supply should start to get very healthy

in the next couple of weeks.

To cap off the decline on Thursday, the Organization of the Petroleum Export-

ing Countries said in a monthly report that its production continues to exceed

demand for its crude oil, even as the group's output fell in October from the

prior month. OPEC decided in 2014 not to cut production despite low prices,

and it is expected to stick to that policy at its upcoming December meeting.

The supply picture has the bulls in retreat and it looks like it will be difficult to

stimulate demand enough to break the down turn. From a technical view we

are still range bound, but testing the August lows. Should the range finally col-

lapse, it is look at below as the $30s are just a stones throw away.

O I L C O N T I N U E S T O S L I D E

Oil and Refined Products

The EIA

estimated that

production rose

by 25,000

barrels a day

last week to 9.2

million barrels a

day.

Bearish



For the natural gas bulls

winter and LNG exporting

can’t come fast enough!

Natural gas prices ended

lower on the week as U.S.

working gas inventories

reached the previous

record-high storage levels

established on Nov. 2,

2012. As natural gas

inventories continue to

build beyond the end of

the injection season, the

market remains under

fundamental pressure,

with little near and mid-

range support for gains

as weather outlooks continue to support ongoing

storage builds into the end of November.

The latest revisions to the six- to ten-day weather

outlook from the National Oceanic and Atmos-

pheric Administration calls for above-average tem-

peratures across the eastern half of the U.S. with

a band of average temperatures stretching from

the center of North Dakota down through portions

of Louisiana and Texas which separates the above

-average temperatures from below-average tem-

peratures that dominate the western half of the

country. A similar weather pattern is forecast for

the eight- to fourteen-day period with a slight shift

in the band of average temperatures as the above

-average temperatures in the east and below-

average temperatures in the west work to collide.

Above-average temperatures dominating through

the end of November in the heat-consuming

NATU RA L GA S : IS W IN TER COM IN G?

Bearish

Natural Gas

Northeast and Midwest should hold back the

cold weather needed to drive substantial

enough demand to begin working off some of

the natural gas oversupply. The

market could however see

some price recovery when cold

weather does begin to ramp up

heating demand, particularly in

the Northeast and central re-

gion, as strong El Nino antici-

pated for the winter should still

equate to a mild winter season

and a slow rate of storage ero-

sion that will likely keep prices

depressed, according to some

analysts.

The EIA said in its latest Short-

term Energy Outlook that it

expects an end-of-March inventory at 1,862 Bcf

as the weather will trim residential/commercial-

sector heating demand, offsetting increased

usage across other

sectors. The EIA

projects the Henry

Hub natural gas

price to average

$2.69/MMBtu in

2015 and $3.00/

MMBtu in 2016

and if projections

come to fruition

the lack of volatility

will make natural

gas a very sleepy

energy play.

The EIA projects the

Henry Hub natural gas

price to average $2.69/

MMBtu in 2015 and

$3.00/MMBtu in

2016



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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The subscription service includes both daily trading signals and the

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modity markets.

EQS Capital Management also offers a commodity hedge fund (EQS

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tion service in a private placement fund for accredited investors and

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

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of which

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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-

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

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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. 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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

newsletter 111615 final volume 1 issue 21

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