As investors gear up for another earnings season, all signs point to decent quarterly results. Analysts steadily lowered their first-quarter profit forecasts during the past few months, and in the continuation of a multiyear trend, companies are likely to meet or exceed that lowered bar.#-ad_banner-#

In fact, the first quarter of 2012 was also quite solid — relative to expectations. Nearly 65% of the companies in the S&P 500 met or exceeded consensus profit forecasts. Yet that was of little help to the broader market: From April 2, 2012, until June 1, 2012, the S&P 500 dropped from 1,419 to 1,278 — a nearly 10% fall.

The S&P’s drop could be blamed on the tepid tone of economic data reported by various government agencies, as the U.S. economy appeared to worsen throughout the spring of 2012. From the Purchasing Managers’ Index (PMI) to small-business confidence measures and gauges of consumer sentiment, the numbers worsened over the course of the spring. (Notably, the subsequent rebound in the market was also tied to an improvement in economic trends.)

Now, consider the market’s response this month to March’s subpar employment report, which showed that just 88,000 new jobs were created overall. The market took a solid hit when those numbers surfaced, but it started the next week on a more upbeat tone once again. (Investors got an early read on the surprisingly negative jobs outlook when the Conference Board Consumer Index reported a nearly 12% drop in February to 59.7 in March.)

And to get all of the bad news out of the way, the National Federation of Small Business (NFIB) reported that its small-business optimism index fell 1.3 percentage points in March to 89.5. The index saw its largest declines in labor market indicators, inventory investment plans and sales expectations. In its survey, the NFIB found that just 4% of small-business owners think this is a good time to expand their operations, which is among the lowest ever recorded in 40 years of surveys.

To be sure, the market is largely shrugging off these reports: The S&P 500 remains within 1% of its recent peak, and appears on the cusp of making a new 52-week high on any given day. Perhaps investors are assuming the incipient phase of economic weakness will be short-lived, and the economy will perk up by summer, as was the case in 2012. Or perhaps investors aren’t even paying attention to these economic reports. Ignorance is bliss.

But if you want to preserve any gains you’ve built up in this multiyear rally, you need to keep watching the economic calendar. Here are three key dates:

1. Tuesday, April 16: Industrial production
The Federal Reserve compiles a wide variety of industrial data each month. Unfortunately, those data come with a considerable lag time.

For example, the mid-March reading covered economic activity through February (which showed continued improvements that have been underway in this gauge for the past six months). What will the March data look like? If we note a pullback from the 99.5 February reading, then it’s a sign that weaknesses in employment, consumer confidence and small-business optimism are starting to spread throughout the broader economy.

2. Monday, April 22: The Chicago Fed National Activity Index (CFNAI)
The CFNAI doesn’t get as much as media coverage as other economic indices, but it should. This gauge is derived from 85 distinct inputs, giving us the broadest measure of the economy’s health. In the past six months, this gauge has been quite erratic, swinging between negative and positive readings, which is the result of a wide range of pushes and pulls on the economy right now. You can read about the prior report here and you should mark your calendar for the upcoming reading. The primary number itself isn’t all that helpful, but the Chicago Fed’s in-depth discussion of the underlying trends can yield clues about the health of the economy.

3. Tuesday, April 30: The biggest day of the month
At the end of April, we’ll see a series of economic events that could help determine whether the adage “Sell in May and go away” applies to this market. That’s when:

• The Federal Reserve Open Market Committee (FOMC) kicks off its two-day meetings.
• The Case/Shiller monthly housing price index is released.
• The Institute of Supply Management delivers its monthly PMI report.
• And the Conference Board provides its next snapshot of consumer confidence.

Risks to Consider: Remember, economic readings during a one- or two-month span don’t represent a trend. Instead, investors will want to gauge trends during a three- to four-month time frame to confirm a major directional change in economic winds.

Action to Take –> My colleague Dave Goodboy recently weighed in with his own concerns about the current bull market, and I share many of his views. Still, it’s wise to let the economy tell us where we are going. If the economy can manage to generate robust data sets in coming weeks and months, then this market rally can extend even further, as there is an ample amount of financial firepower that is still in a “buying” mode. Nevertheless, at this point, it’s wise to maintain stop-loss limit orders and adjust your portfolio so that it contains more value stocks, which tend to fare better in choppy markets.