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All rights reserved. 1 www.eqstrading.com
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.
Copyright © 2015 EQS Capital Management LLC, See important disclosure on last page
All rights reserved. 2 www.eqstrading.com
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 )
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All rights reserved. 3 www.eqstrading.com
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
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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
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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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EQS
Commodi-
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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
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commodi-
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cause of its
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EQS has
been rigor-
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About Us
Who is EQS?
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from producer to end-user. Richard is a li-
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Advisor) with the Commodity Futures Trading
Commission and a member of the National
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Richard began his professional career on a
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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
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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.
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Mr. Jonathan M. Lamb is the Director of Business Development at
EQS Trading. As a four year varsity hurdler
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Jonathan earned Bachelor of Science de-
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in Economics at North Carolina State Uni-
versity before focusing on business and
trading.
As part of the first wave of Millennials to
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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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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