What's the big deal with the ISI report? Let’s see:

1. The ISI Purchasing Managers Index increased from 40.1 to 42.8.

2. The current reading has historically been consistent with economic expansion. Yes, you read right. The ISI is signaling not just a second derivative turn, but the possibility of positive economic growth.

3. That's the fifth straight month of increases; fifth straight month of positive surprises.

4. The leading indicators components of the ISI were particularly robust. In particular, the New Orders Index, which increased from 47.2 to 51.1. This is the highest reading since November 2007. And the reading above 50 signals rising production. Yes - that means manufacturing growth.

5. Virtually all of the components of the report were dynamite relative to expectations. And the more you drill down into the report, the better it looks.

I encourage readers to go back and read my article, Op-Ed: Surprises Continue to Drive the Rally. In it, I explain exactly why results of reports (like the current ISI report) were going to catch the vast majority of blue-chip economists completely off-guard.

One of the key factors I elaborated on is that production and shipments in late 2008 and early 2009 had fallen off by much more than the level of sustainable aggregate demand. Thus, there was going to be some sharp “catch up” in the April-June time frame. This is exactly what's being reflected in the ISI report. Note that the Order Backlogs Index increased from 40.5 to 48.0.

This ISI report is probably more bullish than today’s rally suggests. It strongly hints at the possibility of positive economic growth in the second half of 2009.

And you know what? With this read, positive growth in the second quarter of 2009 isn't out of the question. That being the case, a flat or even positive GDP for full-year 2009 isn't  out of the question, either. Imagine it: If the market starts getting a whiff of this possibility, it's going to blow though my 1,100 target for the S&P 500 and head towards 1,350 (see Why the Countertrend Rally Can’t Be Stopped).

In any event, there's no doubt the blue-chip economists need to go back to the drawing board.

These economists have completely missed this recovery. After completely failing to predict the crisis, some of them are well aware of the fact that their credibility (and even their jobs) could be on the line. There's some danger that in their abundance of caution, many blue-chip economists may panic, overdo their revisions, and set expectations too high.

We’ll worry about that later - after July.

In the meantime, look for all kinds of upgrades by economists and strategists in the coming weeks.

This flurry of upgrades in GDP forecasts and S&P 500 index targets will fuel the surge of fear being felt right now by institutional managers that are currently overweight cash and underweight equities. When the sell-side strategists and the economists turn bullish, these buy-side managers are going to have nowhere to hide. They won't be able to blame anybody but themselves for their poor relative performance. And few will have the courage to risk this.

As I explain in my article Memo to Portfolio Managers: Want to Keep Your Job? Buy Stocks,  the vast majority of these managers are going to hold their noses, close their eyes, and hit the “buy at market” button.

Investors interested in getting ahead of this general market trend might consider such alternatives as SPY, SSO, QQQQ, QLD, BGU, TNA.