Front-Running the Rally: How Insider Moves Are Fueling the Market Surge

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Why have the ES and NQ rallied so much in the last two days when the world is falling apart? I can tell you in one word: it's fixed. I've known about ‘front-running’ for a long time. Before the credit crisis, we had a guy, Bert F., who was using my desk, who told us the Fed was going to raise interest rates on Thursday. I didn’t believe it, but I told some hedge funds—and sure enough, at 10:30 a.m. that Thursday, the Fed raised by 0.25 bps. If my desk got the info, how many other people knew? The ES was up on Wednesday and up over 1% on Thursday.

I hate using this term, but back in the old days, front-running was kept a secret. All sorts of traders have been caught passing on information; they lost their jobs, and some went to jail. Today, it’s different. On April 9, President Trump likely said it would be a good day for the markets through a post on Truth Social, stating, “THIS IS A GREAT TIME TO BUY!!!” This was made hours before announcing a 90-day pause on tariffs, which led to a significant market rally. The DJIA surged by 2,962.86 points (7.87%).

Monday was another front run. The ES gapped lower Sunday night, sold off, then rallied to new highs after Trump came out saying Israel and Iran had agreed to a ceasefire. I saw a lot of this on the floor—brokers front running orders and the boys with the better seats, but not even close to the level of front running we’re seeing today.

At 8:30, Jerome Powell spoke to the House Financial Services Committee during his semiannual monetary policy testimony. Headlines hit around 8:50 saying:
“For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” Powell said in prepared testimony for the House Financial Services Committee, which is scheduled to convene at 10 a.m.

The ES traded up to 6143.75 on Globex after Trump’s comments and opened Tuesday’s regular session at 6118.50, up 41.75 points or +0.68%. After the open, the ES had a small drop, then rallied, chopped around for the next hour and a half, and pushed to a new high at 6155.25. Then, the headlines started hitting the tape around 1:20, and the ES sold off down to the 6138 area. After a few higher lows, the ES rallied back up to a new high at 6155.25 after 3:30 and then sold off down to the 6147 area.

These are just a few of the headlines from the day:

• 1:21:59 PM: EU warns a baseline Trump tariff would still spur retaliation

• 2:54:59 PM: Early US intel assessment suggests strikes on Iran did not destroy nuclear sites

• 3:24:56 PM: The US bombs didn’t collapse the underground Iranian nuclear buildings – NYT

• 2:56:35 PM: NETANYAHU: IF ANYONE TRIES TO REVIVE THE NUCLEAR PROJECT, WE WILL ACT WITH THE SAME FORCE

• 3:16:05 PM: Trump told Israel’s Prime Minister Netanyahu not to expect more American offensive – AP

• 3:23 PM: NETANYAHU: WE MUST COMPLETE THE CAMPAIGN AGAINST THE IRANIAN AXIS, DEFEAT HAMAS AND BRING ABOUT THE RELEASE OF ALL THE HOSTAGES IN GAZA, BOTH LIVING AND DEAD

The 3:30 imbalance came out $350 million to buy, the ES traded 6143.75 on the 4:00 cash close, and settled at 6143.50 on the 5:00 futures close, up 66.5 points.

In the end, the ES has rallied 98 points from Sunday night’s Globex low of 5950, and is only 20 points off its all-time contract high.

In terms of overall tone, the ES and NQ markets are firm. Volume was lower, with 1.03 million contracts traded.

What most people see at the end of the trading day is a news story and the net change, not the all-day price action. The ES typically gaps higher, sells off 10 to 15 points, rallies to a new high of the day, chops around, and sells off again. In most cases, the ES will hold at or near the early low—or go slightly lower—but either way, it rallies again, pulls back to a higher low, and slowly upticks over the next few hours.

If it does what it normally does, the ES will have a few small pullbacks, make a new high by a few points, then start to sell off late in the day, just like it has for the past two months. I know it sounds funny, but you can really see these patterns.

There are six trading sessions left in Q2. What we’re hearing is that the total rebalance is valued at $38 to $40 billion. Part of it will be buying bonds and selling stocks.

Here are some index-related notes:

• S&P/NZX Indices: The S&P/NZX 10 and 20 indices had no changes based on the June quarterly review.

• S&P/TOPIX 150 Index: No changes in the June quarterly review.

• MSCI Indices: As of May 30, the MSCI ACWI Index added 30 securities and deleted 61. Notable additions to the MSCI World Index include Ryanair Holdings, Sigma Healthcare, and International Airlines Group.

• Russell US Indexes: The 37th annual reconstitution is expected to finalize at the end of June. Early indicators suggest the Russell 1000 Value Index may increase its allocation to tech and communication services, potentially adding Amazon, Alphabet, and Meta.