Newsletter 062915 Final Volume 1 Issue 1

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

SIGNALS

Greece is a dead horse, why

continue to beat it? Everyone

knew this was coming, so it

should be no surprise, but the

markets are still beating it to

death. It is likely that Greece

remains in the EU because

there is just too much at risk

and the Germans don’t want

to risk losing THEIR money! It

is an interesting story none-

theless, and it has the precur-

sors of many stories that we

will be following for weeks,

months, and years to come.

Again, it is old news. Greece,

Italy, Japan, China, and even

Puerto Rico are all saddled

with debt that simple Eco-

nomics 101 tells us cannot be

sustained because supply

and demand must balance in

the long run.

The story is not that Greece

cannot pay its debt, the story

is following the fallout to the

Greek economy and banking

system as well as the EU, the

world and commodity prices

when these non-third-world

economies start to collapse

under their debt payments.

Remember that as traders,

we hate sideways markets.

Volatility is your friend and

with EQS putting you on the

right side, we can focus on

the economics behind these

global events and model how

we want to trade them.

Since the Greece tumble is

the first major global economy

that the “Oh Great and Power-

ful Laws of Econ” will be shak-

ing out since the Great Reces-

sion, EQS has put caution on

our bull and bear calls and

will be tightening stops until

Monday, July 6th when most of

Wall Street comes back from

a short week and we can fully

digest what is going to hap-

pen in Greece.

Now to the important stuff:

China. If you recall, it was

Iceland’s financial crisis that

set off a global chain of

events that led to the Great

Recession in 2008,

(Continued on pg. 2)

EQS CO NTI N UE S T O WAT C H CH I NA A S TH E WO R L D WAT C H E S GRE E C E

A Volatile Week in Energy

• Despite current road

blocks with production at all-time highs and Greece contagion, EQS is still recommending “long” exposure for crude and products.

• EQS continues to be bear-

ish on natural gas. Its current “short” position has gained 22% since its entry 7/17/2014.

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

China Continued 2

Heat is the Story of Nat Gas 2

Oil Bulls? 3

Refined 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 1 June 29, 2015

A Weekly Publication on the Commodity Markets

TM

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

WTI Crude Oil CLQ15 Long 6/19/2015 60.45$ 1.75% -4.87% 54.02% 39.65% 42.82%

Brent Crude Oil EBQ15 Long 6/19/2015 64.26$ 1.70% -3.50% 62.40% 31.74% 43.25%

Ultra-Low Sulfur Diesel HOQ15 Long 6/19/2015 1.8761$ 1.60% -2.41% 49.17% 26.08% 36.16%

Gasoline RBQ15 Long 6/19/2015 2.1101$ 1.40% -4.61% 44.43% 26.52% 59.38%

Natural Gas NGN15 Short 7/17/2014 4.119$ 1.70% 22.00% 18.18% 59.73% 87.29%


Continued from page 1)

and they only owed $50 bil-

lion. Greece owes $360 bil-

lion, most of that to the ECB

and the IMF, but it is a drop in

the bucket compared to the

1,000 pound gorilla, China.

China has had a net increase

in its equity markets of $7.6

trillion in the last year alone!

As China has loosened up its

markets to allow everyday

citizens the ability to invest in

the booming economy, mil-

lions of investors have been

pouring money into the boom-

ing market. There is currently

$370 billion of margin debt

alone in China, which is $10

billion more than the total at

risk with a Greek default! Do

you think that there could a

storm on the horizon? And if

you thought that the Germans

didn’t want to see Greece

bust, the Chinese government

certainly does not want to see

its market bust as at the end

of the day, it is the Chinese

government that is their bank-

ing system!

Remember the laws of eco-

nomics are laws for a reason.

When you break laws, there

are consequences as Greece,

the EU and world are about to

find out. At EQS, we take a

disciplined approach and

know that in the long run, our

laws of economics will always

prevail and because of that

there is money to be made in

rising and falling markets if

you remain disciplined and

don’t chase horses that are

dead or dying.

O V E R S U P P L Y R E M A I N S T H E S T O R Y F O R N A T G A S

EQS C O N T I N U E S T O WAT C H C H I N A A S T H E WO R L D WAT C H E S GR E E C E ( C O N T )

Furthermore, after reaching

all-time highs in December,

production is finally starting to

slow. Production initially

dropped due to well-freeze

offs this winter but has not

rebounded since, partially

because of drastic rig count

declines and ongoing well

maintenance.

One key indicator to watch is the

downward resistance line intact

since Feb 2014. If breached,

this signal could be a turning

point for the bulls.

EQS remains bearish on natu-

ral gas despite the recent

heat wave, which caused a

short-covering rally. The story

is still too much supply rela-

tive to demand. The recent

strong heat wave increased

power loads and demand for

gas, but has not been enough

to change market sentiment

as data from the CFTC still

shows non-commercials hold

a large net short position in

the market.

However, the tide may be

turning for natural gas. Natu-

ral gas continues to expand

its role in the power sector as

it takes market share from

coal. Coal-fired power plant

retirements are underway this

year due to Environmental

Protection Agency standards,

with a little over 5000 MW of

coal capacity retired in June

alone.

There is currently $370

billion of margin debt

alone in China, which

alone is $10 billion

more than the total at

risk with a Greek

default!

Bearish


Technically, it appears that oil has emerged from

its double bottom earlier this year and is in a flag

pattern (see below). Any break out from this

pattern could drive market sentiment and prices

with it.

EQS is bullish on oil going into the Greece fall-

out. Although US crude oil and product stocks

are still well over the 5-year range, in Europe and

Japan, they are below their 5-year average.

Furthermore, it appears the worst may be over

(for now) for the oil inventory glut as we are final-

ly showing consistent declines in inventory the

last few weeks and EQS expects further declines.

CA N TH E O I L BU LL S RU N TH RO UG H TH E ROA D B LO C K S ?

Bullish

Although production continues to reach new highs,

rig counts have been drastically cut and thus pro-

duction declines are imminent. Global demand

remains healthy and absent a global slowdown,

tighter balances are in store for the second half.

Major caveats exist including Greece and China,

as reported in our front page story. We expect the

Greeks to remain with the Euro, however no mat-

ter how the vote turns out, the very focus of the

story in the media shakes consumer confidence in

Europe and across the world, and a global slow-

down could decrease oil demand and kill bullish

market sentiment. The other major factor we con-

tinue to watch is the US dollar as it continues to

have a strong negative correlation with oil prices.

A fallout of the Greece debt crisis could have bull-

ish implications for the US dollar and crush any

strength in crude prices. Finally, a settlement on

the Iran nuclear negotiations would eliminate

sanctions and bring additional crude supply to the

market.

The question remains whether the oil bulls can

run through these road blocks and soar past

$61.50 to an upside breakout.


We continue to recommend long exposure to RBOB and ULSD as the “summer” driving season con-

tinues for at least one more week going into the American Independence Day holiday. U.S. gasoline

stocks continue to remain at the high end of the 5-year range, but ULSD are on the lower end. The

AAA expects continued high American driving demand and the new University of Michigan Consumer

Sentiment Survey shows a larger expected jump than expected to 96.1. Though demand continues

to be healthy, concerns of Greece contagion and China slowdown are wildcards EQS continues to

watch as this could bring to a halt any rally in gasoline and ULSD.

TH E PRO DU C T S—TH E DR I V I N G I S DR I V I N G GA S O LI N E & D I E SE L

Bullish


EQS Trading

A Division of EQS Capital Management, LLC

8480 Honeycutt Road, Suite 200

Raleigh, NC 27615

Phone: 919.714.7453

www.EQStrading.com

E-mail: [email protected]

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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 062915 Final Volume 1 Issue 1

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