"I'm sure you've been asked this question a thousand times, and I wanted to ask it at the Chart Seminar but didn't get around to it, so deepest apologies in advance...on the Fullermoney charts, when do you roll from one contract to the next in markets such as US Treasuries which have no set delivery date? Also, doesn't the roll have a big effect on the price charts as there is a potentially large jump between prices, and how do you adjust for that?"

Eoin Treacy's view Thank you for this question which I'm sure will be of interest to other subscribers. Thanks also for your participation in the recent Chart Seminar. We always roll with the most active contract. This means that as liquidity moves from the soon to expire contract to the next most liquid, we will roll the continuation chart to reflect the change of focus. You are correct that large contangos or backwardations cause gaps to develop in price charts on contract rolls. We do not adjust for these moves because they reflect actual trading history.

Contract rolls often coincide with at least short-term trend changes, particularly in commodities. Natural gas is a recent example. Government bonds futures have the added complication of coupon changes on the reference instrument which also create steps in the price history. It is for this reason that we utilise yield charts to depict long-term trends for government bonds. For example look at these two charts of price and yield for US Treasuries. The price chart has been basically flat for the last 12 years due to coupon changes while the yield chart has been in a more well-defined downtrend which has base formation characteristics. (Also see David's piece above).