The Dow Jones industrial average rallied nearly 300 points earlier in the day before closing about 30 points lower than it started on Tuesday. Cashin attributed the early surge to positive reactions to Alcoa earnings and "happy talk" about potential quantitative easing in Europe.
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Concerns about German reluctance toward European monetary policy and a Wednesday ruling determining the legality of the European Central Bank's QE predecessor helped to send markets reeling into the close, Cashin said.
"If they find that they operated illegally, that will absolutely poison the atmosphere for the QE," he said.
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Cashin will keep an eye on oil and the Europe ruling tomorrow, he said. He sees more downward movement ahead after a "hollow" rally.
"They said this was the year for volatility? Keep your seat belt fastened," Cashin said.