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)
LIFE 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
EQS TR A D E RE C O M M E N DA T I O N S
THE SOUR C E
F OR C OM M OD ITY
TR AD ING SIGN ALS
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 RALLY…(CONTINUED)
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.
CRUDE OIL: LOOK OUT BELOW
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
NATURAL GAS… ANOTHER FAILURE
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
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ty markets can be a daunting task. Let EQS do the work for you.
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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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THE SOUR C E
F OR C OM M OD ITY
TR AD ING SIGN ALS
TERMS and DISCLOSURES

Newsletter 102615 Final Volume 1 Issue 18

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Newsletter 102615 Final Volume 1 Issue 18