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On Monday morning Dow futures were down more than 300 points after stocks in China crashed 7% overnight while stocks in Europe were also getting crushed.
Overall, it's a terrible start to the year after what was a painful and ultimately disappointing year for investors in most assets in most markets.
But looking back at how we finished 2015 probably holds the key to understanding what has people so nervous this morning.
The so-called "Santa Claus rally" - which says that stocks move higher over the final 5 days of trading in a given year (generally covering the period between Christmas and New Year's) - never materialized in 2015. And so much like the fabled "Years Ending in 5 rally" that never happened the "Santa Claus rally" was yet another disappointment for stock jockeys.
In a note to clients over the weekend, Peter Tchir, a strategist at Brean Capital, looked at these market "failures" and some of the psychological damage that was inflicted on the market as a result.
As Tchir sees it, investors on both the bullish and bearish side of the aisle were disappointed in how the year ended and as a result we're seeing huge volatility to start the year as both sides compensate for being slightly wrong-footed into 2016.
Here's Tchir:
The Santa Rally that never came has effected positioning. While I would agree that sentiment seems awful, I think that the risk of a rally into year-end has ensured that market bears are not positioned as bearish as their sentiment would have you believe. Shorting into a quiet period with strong seasonality is hardly a recipe for success, so look for bears to come out swinging given any excuse. Those who "bought the market for a trade" will be extremely nervous that the rally never really came, and the last two trading days of 2015 ended rather poorly. So while sentiment would indicate investors are underweight the market, I believe actual positioning coming into 2016 is overweight (or less short than they would like to be).
And so what Tchir is basically saying is that investors who bet stocks would go higher got disappointed, leaving the possibility that these investors are bailing to start the year amid any signs of weakness (say, from China).
Additionally, bearish investors didn't really load up on bets against the market leaving plenty of investors who wanted to bet against the market with plenty of "dry powder" to increase positions.
It is this one-two punch of nervous bulls and emboldened bears, then, that in Tchir's view could be exaggerating this start to the year.
As of this writing there were still about two hours until US markets officially opened for 2016, but Monday's action makes it feel like the year has finally started with the first bout of market chaos - which, frankly, has become a somewhat regularly anticipated occurrence - taking hold.