newsletter 072715 final volume 1 issue 5

See important disclosures on last page 1 www.eqstrading.com

SIGNALS

Commodities weakness con-

tinues and despite “Good” Q2

earnings equities having a

hard week. With commodities

getting beat down, are the

equity markets and the econ-

omy knocking on recession’s

door?

We have been “beating the

dead horse,” but China stays

front and center as their PMI

contracted for the second

month in a row. With the

Communist Party pulling every

trick in the book to keep their

equity market propped up and

prevent old fashioned political

unrest, they may have forgot-

ten the importance of keeping

their manufacturing numbers

over inflated. With China the

largest consumer of, well,

about everything, the Govern-

ment may have been too distract-

ed with propping up the equity

market to keep Chinese factories

pumping out goods, and thus

making the world think that every-

thing is hunky-dory.

It is simple economics: If the

manufacturing industry in the

world’s largest economy is using

fewer inputs, (Continued on Page

AR E COMMO D I TI ES PO I N TI N G TO A GL O BAL REC ESSI O N?

Some Good Runs This

Week!

-Oil and the Products are up a strong 7.66 % since our short call 10 trade days ago

-Shorting Gasoline has paid off 10.29% since the short call on 7-13-15!

**You can achieve these results with discipline and by following the EQS daily trade recommen-dations and using the daily EQS Stop Loss guidance

I N S I D E T H I S I S S U E :

Recession Continued 2

Natural Gas 3

Oil and Products 4

Terms and Disclosures 5

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 5 July 27, 2015

A Weekly Publication on the Commodity Markets

TM

ENERGY TRADE SIGNALS FOR TRADING DAY 7/27/2015

Commodity Symbol Position Entry Date Entry Price StoplossCurrent Position

Profit (Loss)

Rolling 1-Year

Annual Return

Rolling 5-Year

Annual Return

Rolling 10-Year

Annual Return

Average

Volatility

Sharpe

Ratio

Max Draw

Down

Win/Loss

Ratio

WTI Crude Oil CLU15 Short 7/13/2015 52.78$ 1.60% 8.62% 38.96% 34.06% 33.03% 18.1% 2.30 -30.13% 1.30

Brent Crude Oil EBU15 Short 7/13/2015 58.61$ 1.70% 5.29% 61.88% 35.51% 44.70% 43.5% 1.30 -30.44% 1.30

Ultra-Low Sulfur Diesel HOU15 Short 7/13/2015 1.7360$ 1.60% 6.43% 43.86% 24.92% 35.52% 31.4% 1.28 -51.05% 1.14

Gasoline RBU15 Short 7/13/2015 2.0451$ 1.40% 10.29% 48.03% 33.62% 62.27% 76.4% 1.20 -25.09% 1.21

Natural Gas NGU15 Short 7/17/2014 4.119$ 1.05% 40.39% 37.41% 78.14% 107.66% 116.7% 1.59 -30.87% 1.15

Light brown refers to current position and dark brown refers to back-tested results averaged up to a 10-year period. No leverage utilized on these results.


(Continued from page 1)

commodities prices fall…and guess what we have been seeing?

For all of those that are equity traders, the good Q2 and job numbers should have had the bulls

running last week, however we no longer live in the four walls of America and fear is starting to

set in as a Fed Rate hike could be around the corner. We will be watching the Fed closely, as

with Canada falling in a recession and China, the rest of Asia and Europe on the brink of follow-

ing suit.

Commodities tend to be a leading indicator, falling prior to recession. Commodities have had a

hard run, falling across the board in the last year. Commodities are a direct reflection of the

global economy, and as prices continue to fall, there is no surprise that the world economy is

starting to cool and we may be nearing the end of the business cycle.

Over here in the Land of the Free and the Home of the Brave, Wall Street had a bumpy ride last

week despite good Q2 earnings for most firms. Wall Street is finally starting to wake up to what

those of us that follow the commodities market have been seeing, and despite strong Q2 num-

bers, the future picture is changing.

The American economy has been the bright spot of earnings reports from Q2. For firms that

have little exposure to China and the Global Economy we saw some good earnings as the Ameri-

can economy is enjoying cheap oil. The jobs data came in strong this week, as the Department

of Labor reported that initial claims for unemployment fell to 255,000—the lowest number since

November 24, 1973!

The all-powerful and mighty Apple took a haircut last week, despite making a Q2 profit of $10.6

Billion. They lowered their outlook and the company lost $60 billion of value overnight! To top it

off Amazon reported a profit for the first time ever and gained $45 Billion of value overnight,

which was 96 times their total profits, which meant they surpassed the market cap of Wal-Mart.

To say the equity markets are behaving irrationally is an understatement; that is why you need

to learn and harness the power of the commodity markets.

With the global landscape a Fed Rate hike at this late stage of the economic cycle is

extremely risky; however Ms. Yellen may have no choice to but raise rates as being

caught in a recession with an interest rate near zero could be disastrous. We will

closely be monitoring the Q2 GDP data and paying close attention to the Fed as a Sep-

tember rate hike could quickly derail the American economy .

REC ESSI O N….(C O N T . )

Being caught in a

recession with an interest

rate near zero could be

disastrous.


The bulls were ready to run going into the stor-

age report, however a build of 61 billion cubic

feet killed the rally and prices again fell for the

week. Even with hotter temperatures over most

of the continental US, demand is just not there

to offset production.

Total U.S. natural gas storage stood at 2.828

trillion cubic feet as of last week. Stocks were

622 billion cubic feet higher than last year at

this time and 81 billion cubic feet above the five

-year average of 2.747 trillion cubic feet for this

time of year.

Updated weather forecasting models continued

to call for higher-than-normal temperatures

across most parts of the U.S. in the first half of

the week, before a shift to cooler weather push-

es readings to near normal across much of

Northeast and Midwest late in the week.

For now, Natural Gas has failed the $2.90 line

and looks like the Bulls are going to have to stay

penned up just a bit longer.

Remember, key catalysts for the bulls remain;

improved natural gas demand outlook due to

coal power pant retirements, production finally

slowing (more meaningful since both oil and

natural gas rig counts have declined), and a

break of key resistance in place since last year

(currently around $2.95/mmbtu).

Natural Gas: just waiting for the bulls to run

Bearish

Natural Gas


Fifty…what a round magic number. Crude

dove back below $50 a barrel to almost a 4

month low, breaking this important psychologi-

cal barrier. The Bulls and Bears put up a good

fight over that magic fifty number, but in the

end the bears clawed their way to victory once

again.

The dollar strength and oversupply concerns

still are the major factors that are driving oil

and the products lower. EIA crude inventories

rose 2.47 million barrels, and EIA distillate

supplies rose 235,000 barrels to over a 3 year

high. Further exacerbating the downward

spiral is a concern of China slowing (see cover-

story) and the implications of lower oil de-

mand.

The rally that began in mid-March was driven

by the perception that the global rebalancing

of the oil market was underway and was going

to accelerate. Since the rally peaked in June

the market has come to the reality that even

with an over 60 percent cut in rigs deployed to

the US oil sector, production has not yet de-

clined. In the meantime, OPEC production has

been soaring with no sign of abatement any-

time soon as Saudi Arabia is soaring at record

high producing levels. Demand has increased

but supply continues to outpace demand and

there is just not the buying power to hold pric-

es above $50 until we see some major chang-

es on either the Supply or Demand side.

No doubt, sub $50 oil has brought out hedge

TH E P SYCHO LO G Y OF SU B -$50 O IL

Bearish

Oil & Products

buyers again as that psychological mindset

of oil with a “4 handle” just seems too

good to pass up as we see at every $10

price point increment.

We continue to watch the debate from the

Iran nuclear talks as the next hurdle is

actually getting everyone to approve and

ratify the terms that have been hammered

out. The deal still remains very important

for stability in the region and there are still

questions as to if the region is more or less

stable with a deal. The fact remains there

is lots of oil under all that sand. Anything

that caused more or less oil to come out of

that sand will tell the story if we are more

likely to see a 3 or a 7 handle on oil.


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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 072715 final volume 1 issue 5

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