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Cramer: Markets got a wake-up call

Don't fret, investors. U.S. equities are right to trade sharply lower, CNBC's Jim Cramer said Tuesday.

"This kind of behavior should have happened yesterday. We had the dollar strong yesterday; we had bonds going the wrong direction yesterday. It was a really terrible day and somehow the market rallied," Cramer said on "Squawk on the Street."

On Monday, equities closed higher across the board, with the blue chips index rising 125.61 points in seesaw trading.

"It's almost like the markets got the wake-up call that the market shouldn't have rallied," Cramer added.

Read More Europe stocks plummet as Volkswagen plunges 18%

U.S. stocks opened trading with the Dow Jones industrial average falling about 200 points, tracking European equities, which were led down by Volkswagen's 18-percent stock fall.

The German automaker's stock have been in free fall since U.S. regulators discovered that some models had software designed to give false emissions data.

Volkswagen U.S. listed shares in last month


"In talking with a lot of executives familiar with the foreign situation, Volkswagen is GM, Ford and Fiat. It's their company," Cramer said.