Cramer: A 'Nightmare Scenario' for Both Bulls and Bears

CNBC's Jim Cramer has become more cautious on the market right now and conditions are creating a "nightmare scenario" for just about everyone involved, he said on "Squawk on the Street" Monday.

"I don't like the market as much because I do believe the quarters aren't going to be that great. I just don't think they're going to be blowout," Cramer said. "What I'm calling for is a market which doesn't really do anything."

"I have gotten more cautious. The mechanics of the market are going to play out here," he said.

This caution is based on the impending "markup" period by aggressive growth funds that are looking to preserve gains, and this kind of rationale can trump market fundamentals. Along with the upcoming Fed meeting, these dynamics could create a dip in the market, he explained. "I think you have to accept the fact that there can be a trough and then a rally."

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"There is not enough business activity to justify a backup in rates," he said. "Everyone is looking for direction." Instead, Cramer wants to see real increases in business activity instead of a reliance on Federal Reserve "life support." This will lead to stable growth, instead of a bubble, he explained.

Two names that Cramer said "acted well last week" were General Mills and Bristol-Myers, but "those stocks were signaling imminent recession in eight to 12 months" because they bottomed. "You don't want to see that," he added, because big players are moving back into stocks that they consider to be safe havens.

There are many different perspectives in the market, he said, and those who were betting on a rebound last week had their money in bank stocks and "that group started losing at the end of last week."

(Read More: Cramer's Game Plan: It's All About the Fed)

"There are too many players right now. There are bond vigilantes, there are guys that don't like the growth stocks, there are guys that say stocks are too expensive," he said. "Then there's this group of core people huddled with big gains who have to preserve them at all costs."

"This is a nightmare scenario for both bulls and bears," he said. "It's a battleground."

—By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul.