"I like the fact that the character of the market is likely to have had a correction and is setting itself up for a rally again. I think it's not quite as intense" as past years, he said. "I'm less convinced of the Fed's relevance. I think they're kind of neutered and I don't think additional easing is really having any impact right now. But it might be a positive force because a lot of people think the Fed easing will be a reason for the market to go up. But I don't think it is."
Paulsen said the "sell in May" debate could be decided Friday, because another weak jobs report with a sub-100,000 nonfarm payrolls number could bring a selling wave. On the other hand, a very strong number well above 150,000 could bring in buyers.
"It's claims Thursday and it's jobs Friday, and that's where the rubber meets the road," he said.
Tony Crescenzi, senior strategist and portfolio manager at Pimco, said the seasonal slowdown, as in the past three years, has begun but investors may not head for the exits as much this year because of it. He said car sales and housing remain strong.
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"The current period is showing the same pattern. The difference is the seasonal influences are slowly fading so the dips in the data, the weakening of the data aren't so severe," he said. "Markets expect seasonal swoons so therefore, they're taking this swoon in stride." However, if this swoon does not reverse during the summer as they have in the past, markets could have a more violent reaction.
What to Watch
Besides the Fed, there is important ISM manufacturing data at 10 a.m. ET and ADP employment data at 8:15 a.m. ET. Construction spending numbers are out at 10 a.m. Monthly car sales are also expected to be released by auto companies.
The Treasury's refunding announcement is at 9 a.m. and could be important as traders have been speculating the Treasury could tip its hand on the size of future auctions.
Earnings are expected from media companies Comcast (CNBC's parent),Viacom and Time Warner. Merck, MasterCard, Allergan, Garmin, Humana,Hyatt Hotel, Devon Energy, CVS Caremark and Chesapeake Energy report before-the-bell. Facebook and Visa report after the close, as do Yelp, CBS,Seagate, Allstate, Murphy Oil, Prudential Financial, MetLife, Marriott andTesoro.