The rotation out of momentum stocks in the biotech and Web sectors looks like a natural phenomenon, but investors should remain vigilant about a much deeper drop in those already hard-hit stocks, CNBC's Jim Cramer said Monday.
The market's narrative has changed from bubble talk to "the incredible, shrinking bubble—the amazing air going out of the balloon" in the small-cap index Russell 2000 and in difficult-to-value stocks, Cramer said.
Cramer identified three categories of stocks that could see bigger declines—biotech stocks, software-as-service companies and cybersecurity.
"What I'm saying is, Don't fret,'" Cramer said on "Squawk on the Street." "It's happening very smoothly, except for if you're in those stocks."
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Cramer called the rotation affecting high-growth stocks a "terrific" thing for the market. Moments after issuing his warning about those former high-growth stocks, the Dow opened trading at a new all-time high: 16,663 points.
Cramer named cybersecurity firm FireEye and cloud-computing company salesforce.com as stocks that may have deeper drops in store. Both stocks saw slight gains in Monday morning's opening rally.
"These companies are still very overvalued," Cramer said. "So you still have a big, big decline that could happen in these stocks, but the rest of the market is doing quite well."
—By CNBC's Jeff Morganteen.
Disclosure: Cramer's charitable trust does not have positions in FireEye or salesforce.com.