LONDON (Reuters) - The benchmark equity index edged up on Wednesday to touch fresh five-year highs but its failure to close above a key technical level led some traders to expect a minor, near-term sell-off.
The blue-chip FTSE 100 index closed up 0.3 percent, or 16.30 points higher, at 6,395.37 points - its highest level since early 2008.
The FTSE fell towards the end of the trading session, however, down from an intraday high of 6,412.44 points.
Traders said the fact the index could not hold above the 6,400 point level, seen by many as key to more near-term gains, meant it was now more likely that the market would fall in the coming sessions.
"There are reasons to be bullish but we do expect a light correction of around three percent over the next week," said JN Financial trader Rick Jones.
"There's an opportunity to book some profits," he added.
Jones said he had sold the FTSE 100 at around the 6,400 point mark on Wednesday.
Jones said the market could retreat to around 6,200 by the end of this week, before eventually recovering to 6,600 by late March or early April.
Monetary stimulus measures by central banks have supported equities in spite of the weak economy, which is why most investors remain bullish on stocks this year. A Reuters poll showed that the Bank of England was expected to inject more cash into the economy in 2013.
Insurer RSA was one of the biggest drags on the FTSE, slumping 14.2 percent after it cut its dividend, and rival Aviva fell in its wake, dropping 4.1 percent.
"Economic torpor in much of the world and competitive insurance rates globally mean that RSA will struggle to grow its top line, we believe," Investec analysts wrote in a research note, keeping a "sell" rating on RSA.
Drinks-can maker Rexam surged 5.3 percent to top the FTSE 100 after posting higher profits and raising its dividend, with Bank of America Merrill Lynch analysts keeping a "buy" rating on the stock.
Darren Easton, director of trading at Logic Investments, said there were signs the FTSE's strong start to 2013 was fading slightly.
The market has risen 8 percent since the start of 2013, against a 5.8 percent gain in the whole of 2012.
"It does feel tempting to call the top of the market here," Easton said.
Securequity sales trader Jawaid Afsar said he would look to book profits on the rally by "shorting" the market, namely taking out bets on future falls.
"If the market continues to go higher, I would be looking for opportunities to 'short' the market," he said.
(Editing by Sonya Hepinstall)