"What happened yesterday is that we saw the absence of retail money at the end of the day," Cramer said. "You had a temporary squall in the last hour that snowballed. There was no money to absorb what I saw as futures selling."
"Retail doesn't like crazy volatility," he said of the sell-off, "It makes them wish that they were back in those bond funds." Cramer said that "bonds are such a suckers' bet," and that "people continue to put money in a place that doesn't work, that won't work eventually."
"We saw an early reversion of what it used to be where there used to be a flood of money. For a brief shining moment I thought it had returned, now I feel like I got faked out of my boxers," he said.
With the absence of buyers at the end of the day, fears over events in Europe and the looming budget sequestration could have encouraged short term investors to take profits and keep money on the sidelines. But Cramer thinks that the U.S. banking system has decoupled from Europe to such an extent that worries should ease.
"I feel that we could have another run on the cyclicals. I'm looking at these retail numbers and I am not going to say that Macy's is an aberration. It's a big department store doing well. I like retail because it has the domestic security," he added.
Cramer was also trying to find A silver lining in the situation in Europe. "Europe hasn't been good the whole way, but we need to see some growth. Would an Italian pro-growth government be so bad? Do we need endless austerity? Maybe austerity is enough, maybe we need the Italian economy to do better. It's a great manufacturing country, but they want austerity at any cost," he said. (Read More: Italy's Stalemate Could Mean Chaos for Euro Zone)
Cramer said that the current situation in the United States is "not as dire" but remains "mixed" and was positive on the Federal Reserve's approach to managing the economy.
"The days when you should have questioned Bernanke's acumen have long past. I think Bernanke has done a good job," Cramer said prior to Fed Chairman Ben Bernanke's appearance Tuesday before the Senate Banking Committee. "The days where I said that 'they know nothing' are long past," referring to his iconic 2007 rant on CNBC in the early days of the credit crisis.
"I think he's quite a good Fed chairman," Cramer said.
— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul