The stock market could soon reverse its 'borderline miraculous rally' and retest June lows, UBS's Art Cashin says

• Stocks could whipsaw and retest June lows despite October's positive inflation report, Arthur Cashin said.
• Cashin noted that stock market rallies since June have been fleeting, and it's still a bear market.

The stock market could soon reverse its "borderline miraculous" rally and retest the lows seen in June, according to UBS's Art Cashin.

"I still think we will probably go back and retest the lows," Cashin said in an interview with CNBC on Friday, a day after investors cheered October's surprisingly positive inflation report and spared a blistering rally of more than 7%.

But rallies in bear markets are short-lived, Cashin said, predicting more volatility to come.

"Yesterday's rally was borderline miraculous. They kept moving up, there was no retracement, no pause-and-look-backs. But, not to rain on the parade, you have to remember that rallies in bear markets are short, sharp, and die in low volumes," he added.

Other commentators have been voicing hopes for a new bull market to materialize as inflation shows signs of rolling over. Fundstrat's Tom Lee predicted a 20% rise in the S&P 500, and Wharton professor Jeremy Siegel said the Dow could surge another 2000 points once the Fed pivots to cutting rates.

But that's unlikely to happen next year if the US doesn't see a recession, according to strategists at Bank of America, and prices could stay sticky despite the recent downtrend in inflation.

That could spell more bad news for equities, which have been weighed down by sky-high inflation and Fed tightening all year. The S&P 500 has slid over 20% since January, and notched its worst first half of the year since 1970.

Rallies since then have usually ended when the Cboe Volatility Index neared a critical level of 20, Cashin noted. The VIX—known as the stock market's fear gauge—is currently just above that threshold, clocking at 22.61 as of 1 p.m. ET on Friday.

"It's been like an electric shock," Cashin said of the VIX. "And the rally that was going on when the VIX got around there ended and rolled over. So for me, that will still be a key indicator."