Art Cashin explains the sell-off: Stop looking for logic in a market trading on momentum

What happened to our rally?  September started so well, with a huge gain.

But since Sept. 3, it's been mostly downhill. The average stock is not doing well. The equal-weight S&P 500 is at its lowest level since mid-July. Health care, banks, energy and small caps are in clear downtrends. As for investing styles, nothing seems to be working in September: Growth, value, low volatility, quality, momentum are all down 5% to 8%.

You can't blame traders for getting worried. Of the half-dozen "buckets" that move the markets, only one — progress on treatment/vaccine — has clearly been a positive this month.

 The rest are moving against bulls:

  1. Reopening: worsening COVID cases, particularly in Europe
  2. Stimulus: Fed officials are begging for more stimulus from Congress, but the market doesn't think we're going to get it. The Fed is not expanding its programs either. 
  3. China: elevated trade tensions
  4. Valuation: How do you value technology stocks in a Covid environment?

Of all the issues the market is grappling with, valuation seems to be the most difficult. Technology stocks have benefitted from coronavirus and work-from-home, yet no one knows how to accurately value them. Case in point: Apple, going from $100 to $138 and back to $107, all in seven weeks. The largest company in the United States rallies nearly 40% in a month, then drops 22% in three weeks?

When I am confused and baffled, I turn to my old friend, Art Cashin from UBS, recuperating from knee surgery but still watching the markets like a hawk.