This study aimed to investigate the effect of contagion and recovery of the Indonesia's capital market condition due to the global financial crisis caused by subprime mortgage default in the United States in 2008. The Indonesia's capital market condition is represented by Composite Stock Price Index, while the America's stock market is represented by the S&P500. Stability of the financial system of a country is influenced by external and internal economic conditions. External economic condition can be the occurrence of shock in the capital market of other countries, while the internal economic condition is macroeconomic of a country. Internal economic condition in this study is represented by the exchange rate and foreign transaction. This research was conducted in two periods, namely the period of the global crisis (July 2007-December 2010) and the period of recovery after the global crisis (January 2011-December 2013). This study used a quantitative approach with Error Correction Model. Monthly data was analyzed by Ordinary Least Square (OLS) method. The results showed the occurrence of contagion effect in the Indonesia's capital market. This result showed Indonesia's capital market was in a vulnerable position, which was shown from a short-term relationship that occured in the JCI-GSPC in the period of crisis and recovery, as well as JCI-exchange rate in the period of crisis. Indonesia's foreign transaction demonstrated the long-term equilibrium relationship to the Indonesia's capital market. This suggested that the Indonesia's foreign transaction was strong enough to face shock caused by the global crisis.