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Actionable news in QQQ: PowerShares QQQ Trust, Series 1,

How to Trade Stock Markets Before They Completely Fall Apart

Attention stock market bulls: You can't ignore the downside risks that lie ahead. If you consulted the technical charts you'd see the five major averages will all be negative by Memorial Day unless the S&P 500 (^GSPC) can set a new all-time high.

All five of the major averages still have overbought weekly charts. Other averages will likely have declining weekly momentum as early as this week.

Here's how to trade the five major U.S. equity averages via exchange-traded funds.

The Dow Jones Industrial Average (INDU) can be traded using the SPDR Dow Jones Industrial Average ETF (DIA) , aka Diamonds.

Must Read: Scared? How to Trade Treasury Bonds and Gold in a 'Flight to Safety'

The S&P 500 can be traded using the SPDR S&P 500 ETF Trust (SPY) , aka Spiders.

The Nasdaq Composite (NDAQ) is best traded using the ETF that represents the Nasdaq 100, the PowerShares QQQ Trust ETF (QQQ) , dubbed QQQs.

The Dow Jones Transportation Average can be traded using the iShares Transportation Average ETF (IYT) .

The Russell 2000 can be traded using the iShares Russell 2000 ETF (IWM) .

Here are the weekly charts and trading levels for the five stock market ETFs.

Diamonds

Courtesy of MetaStock Xenith

The weekly chart for Diamonds (closed at $177.34 on Friday) is positive but overbought with the ETF above its key weekly moving average of $175.84 and well above its 200-week simple moving average of $160.81. The weekly momentum reading slipped to 89.08 last week down from 90.29 on April 29, still well above the overbought threshold of 80.00.

Note how the key weekly moving average held at last week's low.

Investors looking to buy Diamonds should consider doing so on weakness to the 200-day simple moving average of $171.08.

Investors looking to reduce holdings should do so...


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