European indexes tread carefully in "overbought" states

LONDON Wed Jan 30, 2013 8:12am GMT

LONDON Jan 30 (Reuters) - Technically overbought markets and investors keen not to miss out on further gains have left European indexes in a delicate position ahead of the Federal Reserve meeting and jobs data in the United States on Wednesday.

By 0802 GMT, the FTSEurofirst was down 0.75 points, at 1,177.04, having slowly inched near to highs hit in mid-February 2011 over the previous few sessions.

But with most major European indexes now in overbought territory some investors are starting to question when a correction will happen.

"Indexes are at overbought levels and yet there has been no pullback. A fall of 1-1.5 percent may be all that we get heading into the new month and the real correction may not happen until March (echoing the pullback in 2012)," Jawaid Afsar, a sales trader at Securequity, said.

He said while overall the "trend is your friend" there are two catalysts in the next couple of sessions -- the update from the Fed and U.S. jobs data on Friday -- which could have an impact on market, and Afsar recommended short-selling index futures around the data if only to unwind the overbought state of the market.