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Cramer: Markets to face big test

U.S. equities have their work cut out for them, CNBC's Jim Cramer said Monday, the first trading day of 2016.

"We left 2015 in 'Crazy Town.' 'Crazy Town' meant that when oil went up, the market went up. When the dollar went down versus the euro, the market went up. So we're going to face a real test case this morning, because the dollar is going down against the euro and oil is going higher. So the machines are set off to buy; not sell," Cramer said on "Squawk on the Street."


U.S. oil futures rose more than 3 percent Monday morning, amid rising tensions in the Middle East. Saudi Arabia severed diplomatic relations with Iran on Sunday after the execution of a prominent Shiite cleric.

The dollar fell sharply against the euro in early morning trading, before paring gains.

"We were in a tick-for-tick market with oil in 2015," Cramer said. "This is going to test that."

U.S. stocks kicked off the year on a negative note, with the three major indexes falling about 2 percent at the open after Chinese equities were routed overnight by weak manufacturing data.

"I think people wanted to race out the door. At the same time, [the Chinese government] put in some circuit breakers that remind me of 1987, how they didn't really know how the circuit breakers would work. It looks like they encouraged selling; not discouraged it," Cramer said.