Though buying pressure began to wane today traders still managed to push the indexes into an even greater overbought market condition – the major indexes are now approaching key resistance levels.

As I mentioned earlier this week, the weekly middle Bollinger Band line for the S&P 500 index is at 1995, but the S&P 500’s 200-day simple moving average is at 2024, which is the long-term primary resistance point. Then at 2030 is the monthly middle Bollinger Band line—all major overhanging resistance levels as we approach these levels in extreme overbought and overvalued market conditions.

For example, we now have the McClellan Oscillator for the NYSE at 94.16, a very rare overbought breadth level. In fact, we have to go back to 2004 to find the NYSE getting this overbought! Furthermore, today was the lowest volume day of the year.

I think the reason why the McClellan Oscillator has been able to bounce to such an extreme number is a result of the bearishness that resulted in the worst start of a year in history in January to mid-February.

The central planners have used this bearishness by squeezing the shorts to their favor. But you need to understand that nothing is really changing fundamentally for the economy. Nothing is being fixed while stocks prices are incredibly stretched just a month out before first quarter earnings reporting.

While we are seeing quite a move recently in small caps in this early spring rally, notice the new highs still are not outpacing new lows in the NASDAQ markets.

This suggests that while we are seeing a robust bear market rally, market breadth is still not strong enough to broaden out the buying to where new highs are leading new lows in the NASDAQ.

This is still bearish territory, with the 50-day moving averages well below the 200-day moving averages in technical terms.

However, on an intermediate-term basis, we saw a similar rally that lasted about six-weeks beginning in September to the first week of November, which set up the January/Feb. plunge.

I think we are seeing a similar type of a set up with the next plunge likely to follow from mid-April and down sharply in May, yet that could come sooner given how overbought we’ve become and at the rate the global economy continues to downgrade.

Today China’s credit-rating outlook was lowered to negative from stable at Moody’s Investors Service, which highlighted the government’s financial strength may come under pressure if it takes on liabilities from troubled state-owned companies, while capital outflows have limited policy makers’ scope to stimulate the weakest economy in a quarter century. China’s economy looks to be crashing!

Our economy is not going to escape this global recession that is mushrooming. Look for a near term peak around this Friday following the jobs report.