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Britain's FTSE hits new peaks

Monday, January 21 12:18:00

Britain's FTSE 100 nudged fresh 4-1/2 year peaks today, with appetite boosted by signs of progress on U.S. budget talks, but the scale of the recent rally prompted chart followers to warn of a possible pause.

U.S. Republican leaders signalled they would allow the government to raise the debt ceiling and borrow enough money to prevent a government default in the next three months without demanding immediate spending cuts from President Barack Obama.

The news, late on Friday, helped top U.S. stock indexes close at five-year highs and filtered through into stronger markets across Europe. Britain, with its strong trade ties to the United States and a heavy dose of internationally-focused companies among its blue chips, was a key beneficiary.

The FTSE 100 was up 12.31 points, or 0.2 percent, at 6,166.72 by 1144 GMT, after earlier climbing to 6,180.27 - a level last seen in mid-2008.

The UK blue chip index is up 4.5 percent so far in January, on track for its best monthly showing in half a year.

But the strong gains have taken the FTSE 100 into overbought territory on the 7-day relative strength index (RSI), raising the spectre of a near-term correction or at least consolidation.

"We keep grinding higher ... If you look at stochastics and RSI, they are massively overbought so I am envisaging a correction in the fairly near future," said Jack Pollard, analyst at Sucden Financial.

"If we saw a correction to around the 5,977 area, it wouldn't be a massive concern. If we then managed to hold that, I think people will start loading up on longs and we could move higher again into the end of the first quarter." (C ) Reuters