Consumers Don't Share Market Optimism: Today's Outrage

NEW YORK (TheStreet) -- The market wants to grow again. We've seen that in recent trading patterns. We've also seen what happens when investor enthusiasm outpaces consumer confidence.

Friday's drop in the markets may only have been a warning, precipitated by the weak July retail sales report and the drop in the Reuters/University of Michigan consumer sentiment index.

Those two reports provided a sharp reminder of how important the consumer is to any recovery.

This recession isn't over yet. Inevitably, there will be signs of a recovery long before one actually takes root. Past recessions have shown that we can see isolated gains in quarterly gross domestic product and a subsequent and swift return to negative territory.

This week, retailers will provide the reality check. Already we are seeing mixed messages, with Wal-Mart (WMT Quote) looking strong when it reported second-quarter earnings last week while more upscale retailers like Nordstrom (JWN Quote)and Abercrombie & Fitch (ANF Quote) (ANF Quote) continued to suffer.

We'll see whether Wal-Mart is an anomaly when Target(TGT Quote) and Sears(SHLD Quote) post results this week.

Home Depot's (HD Quote)results are coming too, and those may show that all this talk about a housing market rebound need to be tempered.

I'm not saying it's all doom and gloom out there. I tend to see the glass half full rather than half empty. I'm just cautioning that investors need to stay in tune with consumers.

There is still too much volatility in the market, with more massive single-day pops and big drops this year than we've seen for a long, long time.