Pavlov’s Market

The other morning, someone asked me why we were trading higher.  I made the flippant comment, “they rang the opening bell, that’s why.”  Taking that a step further, on a morning when stocks are higher on a rally that began modestly in the pre-market but accelerated rapidly after the regular session opened, it is reasonable to wonder whether there is indeed a Pavlovian quality to the current market environment.

For those of you who might be unfamiliar with Pavlov and his experiments, here’s a brief primer.  Around the turn of the 20^th century, Ivan Pavlov ran a now-famous experiment where he showed that “dogs could be conditioned to salivate at the sound of a bell if that sound was repeatedly presented at the same time that they were given food.” 

In short, Pavlov’s dogs became conditioned to associate a bell with a reward.  Does that sound all that different from equity traders right now?

This brings about a bit of a follow-up question: why wait until the bell rings when there is active futures trading in the pre-market?  The chart below shows how December ES (S&P 500 E-mini) futures began trading higher throughout the early morning in the US, then accelerated sharply once 9:30 EDT rolled around.

ES December 2025 Futures, October 20, 2025 Trading Session, 1-Minute Candles

Source: Interactive Brokers, Past performance is not indicative of future returns.

Some of this morning’s move in the regular session could have been technical in nature.  The stock orders that were filled on or just after the opening bell were enough to push ES futures to new intraday highs, presumably triggering some stop-loss orders that further accelerated the gains.  But there was no fresh news to propel stocks at that particular moment.

The ostensible reason for the rally was that there were perceptions that the trade disagreements between the US and China were softening.  The President made relatively conciliatory comments over the weekend, and it appears that a high-level meeting between the US Treasury Secretary and the Chinese Vice Premier may be in the cards for this week.  Those are certainly good reasons for a positive outlook on stocks, especially in the absence of government data and sparse Monday morning earnings reports ahead of a busy week on the earnings front. 

Why though, did we take another leg higher as soon as the bell rang and why is this a common occurrence?  Three factors come to mind. 

1. First, it is typical for less active investors to place stock orders during hours when the markets are closed for execution upon the open.  If these orders are to the buy side, particularly in ETFs or large-cap stocks, then it is understandable why they could lift indices. 
2. Options markets open too.  Although there are popular options like SPX that have overnight hours, options on stocks do not.  A rush of call options buying shortly after the open can accelerate a market’s upward tendency.
3. Algorithms are more likely to use regular trading hours than pre-markets.  Those that follow intraday uptrends can further amplify a nascent move.

Bottom line – there are several conditions that make it easier for a market that is already displaying positive momentum to accelerate that momentum.