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Stocks closed this shortened week slightly lower, with the S&P 500 average closing at 1,398.08, down -0.7%.

On Good Friday, however, with the stock markets closed in the U.S., the stock index futures markets reacted very negatively to the disappointing March employment report, which showed that the economy added 120,000 jobs in March vs. expectations of 203,000 jobs. The stock futures in a very short session closed down -1%. Adding fuel to the sell-off in the futures, The New York Times featured a story with the headline "Low Growth In Earnings Is Expected", which talked about the likelihood of the upcoming 1st quarter's earnings reports slowing to their lowest growth rate in three years.

On Wednesday the Federal Reserve Policy minutes pointed to a lack of support for more Fed stimulus (Quantitative Easing or QE3) because of improving economic conditions and concerns about inflation.

The week ahead should be more volatile than any of the past three months as Fed Chairman Bernanke is giving two speeches and other Federal Reserve officials are also speaking publicly. When we factor in the first earnings reports due out for the 1st quarter of 2012 and the renewed concerns over Spain's sovereign debt, the slight 2% pullback from recent highs may accelerate.

Two Likely Scenarios for the Coming Week

The stock market should follow one of two paths this week. A sharply lower opening on Monday will attract the buyers, who have been sitting on the sidelines, and this will be another "buy on dips" opportunity. Or, legitimate concerns about first quarter earnings in light of the recent 30% rally in stock prices will lead to a larger correction.

No need to guess on this one as either scenario should see the 1,350 level on the S&P 500 index hold.

As I've been saying … continue to focus on strong stocks in strong industry groups and view market weakness as an opportunity to position your portfolios for further gains in 2012.

Source: Stocks Close The Week Slightly Lower But...