NEW YORK (

TheStreet

) -- An index of leading economic indicators that is meant to predict economic activity for the next three to six months was recently released and indicated that growth in economic activity will begin soon, but is it correct?

The Conference Board's index covers 10 indicators, ranging from interest rate spreads to consumer expectations. Six of the 10 increased in July. The overall increase in the index marked the fourth consecutive month-to-month increase and pushed the anticipated six-month growth rate to 3% through July, the highest growth rate since mid-2004.

The positive indicators in the index included interest-rate spread, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, index of supplier inventories, stock prices and manufacturers' new orders for nondefense capital goods.

Of these indicators, the real driving force behind an economic recovery is initial claims for unemployment insurance. Although the pace of initial unemployment claims has been slowing, the overall unemployment rate is still extremely high while the numbers continue to fluctuate. One wonders whether companies just are unable to hand out more pick slips without significantly impacting operations or whether things are actually heading in the right direction.

The negative indicators in the index included consumer expectations, real money supply and building permits. This is a bit disturbing when considering that consumer spending constitutes nearly 70% of the nation's GDP and consumers seem to be pessimistic about the economy. If the consumer is not confident that the economy will recover, there is no incentive to spend, a behavior that will indirectly hinder economic growth.

The last indicator, manufacturers' new orders for consumer goods and materials, remained steady. Once again, this indicator suggests that consumers are not confident in an economic recovery and are reluctant to spend.

In a nutshell, with six out of the 10 economic indicators point toward an economic recovery, things are heading in the right direction; however, it is hard to justify a sustainable recovery without a steady flow of improving unemployment numbers and a boost in consumer confidence.

From an investor's perspective, the traditional ways to track a boost in consumer confidence include the retail sector and the performance of a broad based index like the S&P 500. Here are two equities that do just that:

The

SPDR S&P Retail ETF

(XRT) - Get Report

, which is up 71% since a March close of $18.27. The ETF closed at $31.21 on Wednesday.

The

SPDRs

(SPY) - Get Report

, which tracks the S&P 500, closed at $99.96 on Wednesday. It has enjoyed 47% jump since a March low of $68.11.

Both of these equities indicate that things have improved and come with inherent risks. To help mitigate these risks, an exit strategy is important. According to the latest data from www.SmartStops.net, an upward trend in the equities could spell trouble at the following price levels: XRT at $29.48 and SPY at $96.74. Keep in mind that these price levels change on a daily basis and updated data can be found at www.SmartStops.net

-- Written By Kevin Grewal in Laguna Niguel, Calif.

Kevin Grewal is an editorial director and analyst at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, he was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.