Newsletter 02172016 Final Volume 2 Issue 1

Copyright © 2015 EQS Capital Management LLC, See important disclosure on last page

All rights reserved. 1 www.eqstrading.com

SIGNALS

It has been said that Economists have fore-casted 9 of the last 5 recessions. All jesting aside, the media, politicians, business and workers live in a perennial fear of the “next” recession. After seven years of a zero interest rate target, Janet Yellen pulled the trigger and “declared” to the world that the American Econo-my was on a path to “normalization” by raising rates 0.25% on Decem-ber 16th, 2015 and marking the death of the “Great Re-cession” once and for all. But watch out, the bear is on

the prowl!

Economists tend to over complicate every-thing. As Janet Yellen keeps telling the world, the next actions of the FED are “data depend-ent.” Using the data, there is no reason to over complicate the picture that is painted before us, so let’s take a logical look at the economy and when the current business cycle

is going to end.

Put pithily, a recession is a contraction in the business cycle that slows economic activity.

According to academic definition, to have an “official” recession the economy needs to have two successive quarters of contracting GDP growth. According to the IMF, based on quarter-on-quarter changes to seasonal-ly adjust real GDP, the Great Recession in the United

States only official-ly lasted 12 months, from Q3-2008 unit Q2-2009. Most Ameri-cans would likely agree that the Great Recession lasted longer than 12 months; some would argue that we have yet to get out of recession, while others may never have felt the pain of a recession

at all. No matter where your pain scale was for the Great Recession, as we enter 2016-the question now

becomes when will the next recession arrive?

There will be an American recession in 2016. For Asia,

Europe, Russia, Canada, Australia, South America,

Central America, and across the Middle East- the re-

cession is nearing or is here. The “next” recession will

be a global recession, and America will be pulled into

recession in 2016. (continued on Page 2)

6 R E A S O N S TH E R E W I L L BE A RE C E S S I O N I N 2016

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

Recession Continued 2

Precious Metals 4

Crude Oil 5

Natural Gas 7

About EQS 8

Terms and Disclosures 9

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 OU RC E

F O R C O MMOD ITY

T RA DING S IG NA LS

Volume 2, Issue 1 February 17, 2015

A Weekly Publication on the Commodity Markets

©

Commodity SymbolCurrent

PositionEntry Date Stoploss

Current Position

ReturnMTD Return YTD Return

Average 10-Year

Annual Return

Sharpe

Ratio

WTI Crude Oil CLH16 Short 2/8/2016 2.63% -2.77% -4.36% 6.24% 47.77% 2.03

Brent Crude Oil EBJ16 Short 12/17/2015 3.10% 6.74% 5.84% 11.86% 55.85% 1.78

Diesel HOH16 Short 2/12/2016 2.10% -4.20% -6.49% 4.08% 42.44% 1.79

Gasoline RBH16 Short 2/17/2016 2.10% 0.00% 0.28% 9.02% 55.80% 1.20

Natural Gas NGH16 Short 12/4/2015 3.80% 67.37% 18.84% 21.03% 64.31% 1.23

Gold GCJ16 Long 12/8/2015 1.16% 12.55% 8.16% 12.61% 29.61% 2.46

Silver SIH16 Long 8/3/2015 2.00% 20.46% 8.59% 13.94% 60.52% 1.26

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.

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiuvODE0frKAhXLdz4KHab1BQUQjRwIBw&url=http%3A%2F%2Fwww.barrons.com%2Farticles%2Fbest-bear-market-strategy-remain-invested-in-stocks-1453917817&psig=AFQjCNEb3up_vlqb



Recession is not stocks, bonds, oil, or commodities falling by some magic number. Recession is the contraction of a business cycle from one period to the next. Recession can be state specific, city specific industry specific, or product specific, but when enough of those specifics culminate, we get domestic recessions, and when enough of those domestic recessions culminate, we get global recession. Recession has been spreading across countries and continents, and tactical antibiotics that the globe has been using to ward off the recession will not protect the United States to fight off the recession flu in 2016. The general fault of the Great Recession was a “Banking Crisis.” When we dig into “specifics” of the banking crisis, we extrapolate credit default swaps, which went bad because they were backed by bad mortgages, which were taken out because people bought houses in an economy that used residential real-estate to expand out of the recession caused by the “Dot-Com Bust.” Growth in computer technology and the expansion of dot-coms grew America out of the prior recession, and the list goes on and on, boom and bust, boom and bust. Reason number one that America will go into recession in 2016 is that the business cycle that expanded the economy out of the Great Recession was largely driven by expansion in oil and commodities to fuel the growth in China and other emerging markets, and those markets are stagnating or collapsing! The problem is that China's recent economic rise has been facilitated by a massive and unsustainable stimulus campaign. China can only build so many airports, skyscrapers, roads, high speed trains, and shopping malls before the entire infrastructure that is needed is developed. No emerging nation has ever tacked on debt at such a breakneck speed as China has done since 2008, and a rapid increase in debt is the single most reliable pre-dictor of future economic slowdowns and financial crises manifest saliently. China has reached their tipping point of exasperation, China is moving to a service and consumption economy and away from an economy of manu-facturing and that is reducing demand in com-modities and energy, which will trickle over to the rest of the globe that supply inputs that translate into Chinese outputs.

Reason number two, falling commodity de-

mand will cause earnings pain and bankrupt-

cy. Cheap prices are good for consumers, but

very bad for producers. Most recessions tend

to hit low and mid income earners the worse;

this recession will be different. This recession

could be good for low wage earners that

spend a large part of their disposable income

on things like gasoline and food, which are

falling. At $1.60/gallon for gasoline vs $2.20

last year, 200 million Americans are saving

almost $90 billion a year on gas alone and

another $90 billion in other energy costs with

another trillion dollars in savings (or losses if

you are a producer) around the world. In

recent history, it has been been consumers

padding the bottom line of producers, but this

recession will see producers, banks, and

stock & bond holders having to pony up for

the lost margins. As profits decline, expect job losses and decreased capital spending. Falling oil is hitting upper

level jobs in pockets of America that is employed in the oil and gas industry, but it will be crippling to high net-

worth individuals and retirees that invest in domestic oil and gas. Bond holders and banks that invested in oil,

gas, and commodity debt will take massive hits when firms are forced to restructure balance sheets, and this will

trickle over to all sectors of the economy as the losses get spread around. Just a few straws from large com-

modity bankruptcies could be all it takes to break the camel’s back.

REC ES SI ON…(CO N TI N U E D )

An industrial production YOY

contraction of -1% of more has been

linked to a recession every time it

occurred since the early 1960s.



Reason number three: weak corporate earnings and industrial production. Low commodity inputs should be great for corporate profit, that is, if America actually profited. US industrial production (IP) began contracting year-over-year in November 2015 (–1.29%) year-over-year, and deepened in December to (–1.8%) year-over-year. A year-over-year of -1% of more has been linked to a recession every time it occurred since the early 1960s, and If a US recession has not already started or does not start within the next 12 months, with a the current year-over-year plunge of (-1.8%) it will be the first time since 1920 that we have not entered recession with a move of this severity.

America is a service economy, and the two largest US companies are Apple and Google. America needs stabil-ity and/or growing industrial production during an expansion phase of a business cycle. Industrial production is not expanding, and we cannot expect the domestic economy to survive on revenue from the next IPhone or

from internet advertising; the United States is ceremoniously heading for a recession.

Reasons 4, 5 and 6 that the US is heading for a recession in 2016 is jobs, jobs, jobs. As the saying goes, ‘a recession is when your neighbor loses his job, a depression is when you lose your job!’ The headline numbers for jobs has actually not looked too bad as we are nearing “full employment,” however when you really dig though the numbers, they convey an aberration. The real story in jobs is that people in the prime wage working group (age 25-54) are losing jobs, and the participation rate for workers age 25-54 is only about 80% compared to historic peaks in the 85% range. While we may see an expansion in the total number of jobs, the quality is not there. The bulk of job growth is in the senior job market (age 55 and above) and in the hospitality and food

services market.

The thing that matters is the income generated by the jobs market, not the number of jobs. Quality jobs from prime wage earners are eroding. As you can see from the above chart, tax withholding is declining-which con-veys the true story that wages are not increasing with the growth of the headline jobs numbers. When citizens do not have solid, well-paying jobs it is very difficult for an economy to expand, and there is a continuum, that

when this happens-the economy shrinks, and what happens in a shrinking economy? That’s correct, recession.

Countries around the globe are already in recession. Recession will spill over from regional pockets and spread

root to whole continents, becoming ubquitous and grip the world in 2016. The United States just so happens to

be part of this ever shrinking world and as we have outlined in these six simple, salient reasons, recession will

reach the US economy in 2016. As we near recession, continue to keep your eyes on governmental debt from

around the globe, as the next chapter expounds how countries can lever fiscal and monetary policy to stimulate

out of the 2016 recession and remain solvent.

REC ES SI ON…(CO N TI N U E D )

Although the total number of jobs

indicates the US is near full

employment, quality jobs from prime wage earners are

eroding.



Global equities are off to a rocky start this year and talk of a recession is becoming common. Com-modities prices outside gold and silver are slumping to multi-decade lows. But no fear, precious met-als are here and to the rescue. During turbulent times, gold is seen as a safe haven to protect wealth

when all other assets are losing value.

Federal Reserve Chair Janet Yellen is cautious and reticent regarding the outlook of the U.S economy. This is in spite of the Fed raising its key lending rate in December for the first time in nearly a decade. Yellen hinted that future interest rate hikes might be on hold as global stocks continue to tumble, espe-

cially since the beginning of the year. As Wall Street CEOs are final-ly considering there may be a real possibility that the U.S. could slip into a recession in 2016, the Federal Reserve might not be in such a hur-ry to follow December’s rate hike any time soon. A rate hike could very well put the brakes on an al-

ready slowing economy.

Interestingly, concerns of the global economy have put negative interest rates on the table for the US. On January 29th, the Bank of Japan unexpectedly cut its interest rate to -0.1%. This past Thursday, the Swedish central bank announced a motion to push its main interest rate further into negative territory. So it begs the question… is the US next? Fed Chair Yellen recently stated that the Fed should be prepared to use negative rates if needed, so there you have it. One financial strategy that we know the Federal Reserve more comfortable in executing is quantitative easing (QE). While QE4

may not happen in the next month or two, with the central bank just having hiked its rates in Decem-ber, it may very well be forced into this position. For the US not to go down this path, it along with the global economy must rebound. To rebound, the debt problem must be solved. Low interest rates propelled Americans into taking on massive amounts of debt. The average US consumer is drowning in debt so if the economy is not solid, how can increasing rates be the solution? Gross government debt is above 100% of GDP in Japan, Greece, Italy, Portugal, France, Spain, Ireland, and the US and if you suspect China’s GDP is about half of what their government states, the China is in the mix as

well.

The average investor is concerned that this year's bout of market turmoil has not yet ended, and gold

could continue gaining from its status as a haven. And the interest rate environment, where rates re-

main low or even negative, will continue to offer support for precious metals, because higher rates

make the metal less competitive against assets with yields. During these uncertain times, gold is in-

deed one of the few assets glittering right now.

GO L D PR I C E S - -A GL I T T E R OF HO P E

Precious Metals

Fed Chair Yellen recently stated that the Fed should be prepared to use negative rates if

needed .

Bullish

Bullish Factors Dominate



In our 12/7/15 issue of Signals, EQS stated “a leg down in prices is imminent…expect prices to fall to the lower $30’s and risk managers should factor in a worst case scenario in the $20’s. At the time we issued the publication, WTI oil was trading over $40/bbl. Although EQS was right about price direc-tion, our worst case scenario has become more dire (lowered to about $10/bbl) because oil is getting

hit with the one-two punch — persistent oversupply and the threat of a global recession.

It’s not all bad news for oil.

The OPEC production deal seems to have stabilized markets and after trad-ing around $26 (a 13-year low) last week, oil staged an impressive come-back to over $30. Many speculate this could finally be the bottom in oil, how-ever, EQS feels further downside is in the cards. Let’s examine what has to happen for a sustainable rebound in

prices to occur.

When the OPEC announcement hit the airwaves, speculators were at record

short levels, so the majority of the massive rise in prices so far is due to short covering. There were some bargain hunters dipping in and eyeing a potential double bottom formation, and if the global economy stabilizes, then yes, oil prices could have seen the bottom. However, EQS still feels risks remain skewed to the downside as the high probability of a global recession will impair demand and prices are still not low enough for the oversupply situation to resolve itself, absent of an OPEC coordi-nated cut in production. The OPEC production deal did not involve a cut, which is needed to solve the oversupply situation. The agreement is that Saudi Arabia, Russia, Venezuela, and Qatar would cap production at January levels which are already notably high. Furthermore, Iran was not included in the

deal so overall OPEC production is expected to increase.

So what has to happen for crude oil to have a sustainable rise in price? Simply put, production needs

to show a meaningful decline and the global economy

needs to stabilize. Much of the decline in prices has been

due to an oversupply situation. Last year, the world pro-

duced 96.3 mb/d of oil and consumed only 94.5mb/d-so

each day about 1.8m barrels went into storage tanks which

are filling up fast. Although new storage is being built, too

much oil could cause a worst case scenario where storage

hits full capacity and all production must be sold on the

open market. Storage capacity outside the US is virtually

exhausted and if this US runs out of storage, oil would

drop below $10/bbl. The most important storage location

for the US is Cushing, OK, the delivery point for WTI NY-

MEX crude oil futures. Last week, the EIA reported crude

stocks at Cushing rose to 64.7 million barrels, more than

50% higher than a year ago. With a 73 million barrel crude oil tank farm capacity at Cushing, this

leaves a little over 8 million barrels left before storage is full.

H I T W I T H TH E ON E -TW O PU N C H

Oil and Refined Products

If stocks rise like last year, Cushing will run out of capacity by mid-April.

Bearish

150,000

200,000

250,000

300,000

350,000

400,000

20

25

30

35

40

45

50

55

60

Nu

mb

er

of

Futu

res

Co

ntr

acts

$/b

arre

l

Short Sellers Hit Record Level

Speculator Short Contracts WTI Average Weekly Price

Source: CFTC



The problem is the US is in refinery maintenance season when demand for crude drops (less refining capacity using crude) and product demand is lower (less driving this time of year and less heating due to mild weather). So inventories are expected to build and if they build according to the trend in the 5 year average, Cushing stocks will rise just shy of capacity. Conversely, if stocks rise like last year, Cushing will run out of capacity. Either way, the oil market remains oversupplied with US inventories at levels not seen at this time of the year in at least the last 80 years hitherto. So when will invento-ries drop? Once we get past spring refining maintenance into summer driving season when demand

picks, inventories will drop, but it will take time for the oversupply situation to correct itself.

The International Energy Agency points out that global production remains robust and with the lifting of nuclear-related sanctions against Iran on January 16th, the supply picture looks bearish for the first part of the year as Iran is eager to recapture a share in the international oil markets, which it has been shut out of

from much of the past decade.

With oil rigs dropping rapidly and production not showing signs of slowing down, it is clear that while it is not eco-nomical to drill new wells, it is still economical to operate existing wells. This begs the question as to how far prices need to drop to be below the operating cost of producers so that we can begin to see a meaningful drop in total supply. A study from Wood Makenzie shoes that 94% of global production is still able to cover operating costs at $30/bbl and at prices below $10/bbl, Russia, Saudi Arabia, and Iran would be the last countries standing. Further exacerbating the situation is the fact that big depre-ciations against the dollar have allowed Russia, Brazil, and Venezuela to maintain output-leaving oil prices in producers local currencies nearly unchanged since 2014 when prices were over $100/bbl. So if this means that US producers are likely to bear the burden of a supply adjustment, then the above chart indicates that prices would need to drop below 13/bbl for all US Shale producers to not cover operating costs. Therefore, this is why the market views a coordinated cut in production be-

tween OPEC and Russia so important.

The next couple of months will be challenging for the oil market because we will be in a shoulder peri-

od when demand is soft and inventories build. EQS now believes the odds are greater than 50% that

WTI crude will drop below $20/bbl by Q2. However, EQS expects inventories to drop during the sum-

mer once seasonal demand picks up and refining utilization is in full gear. Although some producers

can operate and cover costs at current prices levels, mortal damage is being inflicted on many and

with bankruptcies picking up, supply should substantially come off later this year. Finally, keep your

eyes tuned for an OPEC cut (an actual commitment to cut and not just a cap) as this could be the

catalyst which pulls the market out of a slump.

Oil and Refined Products

94% of global production is still

able to cover operating costs at

$30/bbl .

Bearish

H I T W I T H TH E ON E -TW O PU N C H



Natural-gas prices fell back below the psychological $2/mmbtu level as warm weather forecasts for late February reinforced concerns about weak de-mand and bulging stockpiles. Weather reports are showing an East Coast cold front passing quickly, replaced by above normal temperatures throughout

the second half of February.

About half of U.S. households use nat-ural gas as their primary heating fuel, so a lack of winter cold can often drag prices lower. A powerful El Nino delayed the onset of normal winter conditions in the US Northeast and Upper Midwest. This resulted in one of warmest winters on record with certain weekend temperatures in De-cember breaking record highs dating back to the 1800s. Consequently, heating degree days in De-cember were 28% below normal on a gas-consumption basis and overall, the winter of 2015-16 has run 13% warm-er than the 10-year

norm.

The confla-tion of a lack of win-ter and robust pro-duction drove US storage inventories to reach an all-time high of 4,009 Bcf in late November. The latest inventory survey contin-ues to be bearish as the U.S. Energy Information Administration said Thursday that a far below-normal drain on stockpiles last week left them 25% above levels from a year ago and 23% above the five-year average for the same week. Thus its hard

to sustain any rally with this kind of surplus.

As stated before, the longer term outlook remains bullish for natural gas due to a number of factors. For one, meteorologists have been discussing the possibility of another weather pattern developing – La Nina. Counter to El Nino, La Nina could actually provide a bullish environment for natural gas. La Nina has historically meant dry and warm conditions

DOW N BU T NO T OU T

Bearish

Natural Gas

in the east coast and mid-continent. Secondly, a total of 55 GW of power generation capacity is scheduled to come online in 2016, with 24% of the new additions dedicated to natural gas. This trend of new gas-fired generation and continued coal plant retirements should boost natural gas demand. The new capacity combined with a pos-sible La Nina could set up for a strong power burn in 2016. LNG exports are another longer term

catalyst with Cheniere’s Sabine Pass scheduled to send out its first car-go in late February or

March.

Although sentiment is

still bearish, a turning

point could be in the

cards for this year. If

you look at the monthly

bar chart of the 12-

month futures strip for

natural gas, it appears that prices have been in a

reinforcing down trend bouncing off resistance

levels since early 2014. If we close above this

line and

settle for

the week

higher than

the previ-

ous week,

then it

could be a

clue that

the bottom

is in.

A powerful El Nino resulted in one of warmest winters on record with certain weekend temperatures in December breaking record highs dating back to the 1800s.



Services

Through its subscription service, EQS Trading provides traders and

hedgers easy to follow trading signals for major commodity futures mar-

kets, including crude oil, natural gas, gold, silver and many others. Now,

strategies used by institutions and hedge funds are at your fingertips.

The subscription service includes both daily trading signals and the

weekly Signals Newsletter, which provides in-depth insight to the com-

modity markets.

EQS Capital Management also offers a commodity hedge fund (EQS

Commodity Fund LLC), which employs the same signals in its subscrip-

tion service in a private placement fund for accredited investors and

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

signed to generate returns, regardless of which way the market is mov-

ing. EQS Commodity Fund imbeds strict risk management principles

through

diversify-

ing its

portfolio

(energy,

metals,

and agri-

culture)

and ac-

tively

managing

stop loss limits.

About EQS

Economic Quantitative Strategy (aka EQS) is an investment and trading

strategy that translates economic data and technical indicators into price

direction for commodities. Because 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.

Further-

more, be-

cause the global economy changes over time, EQS employs dynamic

parameters that evolve as the market changes.

About Us

Management

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.



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]

Your use of this subscription is governed by these Terms and Conditions. You may print the documents published in hard copy for internal reference purposes, but not for any other purpose. Specifically, you may not copy, reproduce, distribute or modify the content. The information may be changed by EQS at any time without notice. While EQS will use reason-able efforts to ensure that the information is accurate and up to date, no representations or war-ranties are given as to the reliability, accuracy and completeness of the information. This material has been compiled and presented as general information, without specific regard to the particular circumstances or risks of any company, institution, or individual. It is not intend-ed as, nor should it be construed to be, investment advice. 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. THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") REQUIRE THAT PROSPECTIVE CLIENTS OF A CTA RECEIVE A DISCLOSURE DOCUMENT WHEN THEY ARE SOLICITED TO ENTER INTO AN AGREEMENT WHEREBY THE CTA WILL DIRECT OR GUIDE THE CLIENT'S COMMODITY INTEREST TRADING AND THAT CERTAIN RISK FACTORS BE HIGHLIGHTED. YOU MAY REQUEST A COPY OF THE DISCLOSURE DOCUMENT BY EMAILING EQS. THE CFTC HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS TRADING PROGRAM NOR ON THE ADEQUACY OR ACCURACY OF THE DIS-CLOSURE DOCUMENT. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIG-NIFICANT ASPECTS OF THE COMMODITY MARKETS. THEREFORE, YOU SHOULD PROCEED DIRECTLY TO THE DISCLOSURE DOCUMENT AND STUDY IT CAREFULLY TO DETERMINE WHETHER SUCH TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. EQS CAPITAL LLC IS A CFTC REGISTERED COMMODITY TRADING ADVISOR AND COMMODITY POOL OPERATOR. PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH POOLS WHOSE PARTICIPANTS ARE LIMITED TO QUALIFIED ELIGIBLE PERSONS, AN OFFERING MEMORANDUM FOR THIS POOL IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A FUND OR UPON THE ADEQUACY OR ACCURACY OF AN OFFERING MEMORANDUM. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT RE-VIEWED OR APPROVED THIS OFFERING OR ANY OFFERING MEMORANDUM FOR THIS FUND. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EX-CHANGE COMMISSION (THE “SEC”) OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS AS A PRIVATE PLACEMENT MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-FENSE.

T H E S OU RC E

F O R C O MMOD ITY

T RA DING S IG NA LS

TERMS and DISCLOSURES

Documents

Newsletter 02172016 Final Volume 2 Issue 1