Everyone seems to be scrambling to identify the specific catalyst for the sell-off. A few theories that have been offered up include disappointing manufacturing data out of China on Thursday, an unexpected plunge in the U.K. unemployment rate (which ostensibly puts the Bank of England closer to monetary policy tightening), disappointing earnings results in the United States, and weakness in emerging markets as several EM currencies take a nosedive against the dollar, fanning fears of a slowdown in those parts of the world.

To dwell on these potential catalysts, however, is to miss what is happening behind the scenes that is really driving the sell-off: a massive unwinding of levered bets in the hedge fund community that were placed on views which have become de rigeur to the point that the market has become very one-sided lately.