THE FTSE 100 slipped back this morning from its highest level in four-and-a-half years, with some technical indicators suggesting that a recent rally would fade away in the near term.
The blue-chip index was down by 0.1pc, or 4.68 points lower, at 6,279.77 points by 0905 GMT, having gained 0.3pc on Friday in a move that had pushed the index up to its highest level since mid-2008.
However, the FTSE 100 is now at a level where it was in "overbought" territory, according to technical analysts, which some traders may use as a sign to sell and book profits on equities in the near term.
The FTSE 100's relative strength indicator (RSI) is currently at 79.5 points - above the 70-point level which shows that an index is in technically "overbought" territory.
The FTSE 100 has also risen by some 6.5pc since the start of 2013, meaning the index has already risen by more in January than it did for the whole of 2012, when it rose 5.9pc.
"We're getting to the point where you'll get profit-taking. I wouldn't be buying at these levels," said EGR Broking managing director Steven Mayne.
British outsourcing company Capita was the worst-performing FTSE 100 stock, falling by 2.6pc after Canaccord Genuity cut its rating on the group to "sell" from "hold".
In a research note, Canaccord Genuity said it expected that Britain's coalition government may look elsewhere other than Capita when handing out its next batch of contracts, which could impact the company.
"Capita is a well-managed business that still achieves high returns on operating assets. But the attractions of its investment case have diminished," wrote Canaccord Genuity.
Ashish Misra, head of investments at Lloyds TSB Private Banking, said that although he was upbeat on the prospects for equities globally, he was "underweight" on UK shares.
Misra had an "overweight" stance on Asian and global emerging market equities, partly due to valuation grounds and earnings growth prospects.
"Valuations are not as enticing as last summer with markets up by almost a quarter from June 2012 lows," said Misra.
According to Thomson Reuters Starmine data, the "smart estimate" on the UK stock market gives a price to earnings-per-share ratio of 12 times for the next 12 months.
This is slightly less than a comparative ratio of 12.9 for the Thomson Reuters Asia Pacific Index.
However, those Asian equities are forecast to have earnings growth of 23.3pc over the next 12 months, according to the Starmine "smart estimate", whereas earnings are seen growing at a slower pace of 7.2pc on the UK stock market.