Wall Street buoyed by rallying bank shares –XLU stopped out; RSI picks ITB & IVE

Banks led Wall Street to gains on Thursday even as Europe struggled again, a sign investors are betting a relatively strong U.S. economy will help U.S. stocks outperform other markets.

Overall gains were small, but banks advanced for a third day, supported by better-than-expected economic data. U.S. financial shares continued to delink from their European peers as investors see more potential for growth in U.S. lending that could offset worries about the euro zone debt crisis.

The Dow Jones industrial average .DJI dipped 2.72 points, or 0.02 percent, to 12,415.70. The S&P 500 Index .INX gained 3.76 points, or 0.29 percent, to 1,281.05. The Nasdaq Composite .IXIC added 21.50 points, or 0.81 percent, to 2,669.86.

The S&P 500 closed above its 200-day moving average for a third straight day. It was the first time the index has been able to hold above the moving average that long in five months. But relatively low volumes could undermine the upbeat technical picture. (commentary & photo courtesy of Reuters)

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As the headline reported, the holding in the utility fund XLU was stopped out today. Otherwise the remainder of the RSI holdings performed well. Let’s take a look at today’s two picks:

• Buy  iShares Dow Jones US Home Construction (ITB)
• Buy iShares S&P 500 Value Index (IVE)

RSI’s pick of ITB certainly reflects the recent interest in the housing/construction industry. It has beaten down for many years and it just might be coming back. This sector has been outperforming the market and it has been showing strong technical performance.

IVE also has been outperforming and showing strong technicals. This fund pays out a 2.26% yield and represents the large cap value sector. A good value.

Have a good day.