Mr. Cashin said, “The averages all were lower at the opening and when that didn’t turn into a cascade, we’re seeing the market begin to waffle. When the selling didn’t beget further selling some momentum traders came in and said all right, what’s the vehicle that we’ve been trading so far, it’s the FAANG stocks, it’s COVID stocks. So the momentum traders went in and caused markets to rally… when that rally eventually failed to feed on itself, then we saw them stop buying. We had a little bit of a vacuum for and time as we waffled back and forth.”

The market is not trading on fundamentals like earnings and sales. It’s all about momentum trends over the last few weeks. It’s useless looking for logic in a market that’s temporarily illogical.

The reason tech stocks have been the best place for momentum traders is that they are perceived to be resistant from dangers of the virus and that if anything they may be beneficiaries of the stay-at-home thing.

What traders are doing is buying upward momentum but placing tight sell stop orders so that when the market reverses, bang their out for a small gain and that’s why we’re seeing increased volatility in the market right now.

Art Cashin, UBS floor director, joins ‘Squawk Alley’ to talk about the volatility seen in markets, specific to FAANG stocks.


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