* Chinese holidays in October make next move uncertain
* Market stumbles on profit-taking correction
* Trade awaits cotton export decision by India (Adds closing prices, updates and writes through)
NEW YORK, Sept 23 (Reuters) - Cotton futures closed lower for the second straight day on Thursday due to heavy investor profit-taking and the fact that players from No. 1 consumer China were away for a holiday and are not coming back to the market until next week, analysts said.
"Cotton is getting a much, much overdue setback," Sterling Smith, an analyst for brokerage Country Hedging Inc in Minnesota, said.
The next move of the market will depend to a great deal on what the Chinese do when their financial markets reopen on Monday, the impact of U.S. weather on the ongoing cotton harvest and the extent of cotton exports from India, the world's No. 2 producer of the fiber.
Cotton prices had hit 15-year highs the last three sessions, trading above $1/lb each day. Strong demand from Asia, tight stocks and investment fund buying propelled the rally.
ICE Futures U.S. key December cotton contract CTZ0 dropped 2.45 cents, or 2.46 percent, to finish at 97.17 cents per lb, trading in a band from 96.82 to 99.71 cents.
Total cotton volume traded stood at 25,883 lots at 2:45 p.m. EDT (1845 GMT), some two-thirds above the 30-day average of 15,517 lots, according to preliminary Thomson Reuters data.
(Graph on cotton falling on profit-taking, heavy volume: here)
"Trees don't grow to the sky," Ron Lawson, a cotton expert at commodity firm logicadvisors.com in Sonoma, California, said, calling to mind an old commodity trading cliche.
"This thing has had a dramatic run, (so) people are taking a breather here," said Bill Raffety, an analyst at commodities futures brokerage Penson GHCO in New York.
The Chinese were out of the market due to the Mid-Autumn festival from Sept. 22 to 24 and then they will be on holiday again from Oct. 1 to 7, so many major players may not be around next week either. [ID:nL23389078])
As for India, the market is waiting to see whether it will export more than the 5.5 million (480-lb) bales the government has said it will allow, and whether those exports would begin on Oct. 1 or on Jan. 1, 2011.
Data from ICE Futures U.S. showed no large-scale liquidation of positions in the cotton market at the close on Wednesday, and the trade would want to see how many positions were liquidated in Thursday's action.
Open interest rose 2,298 lots to 237,218 lots as of Wednesday and analysts believe that may well be trade accounts covering their short positions in the market as the bulk of the rise was in March, the next most-active cotton contract.
The market took note of the U.S. Agriculture Department's weekly export sales, which showed total U.S. cotton sales at 571,700 (500-lb) running bales, above trade belief it would range from 300,000 to 400,000 RBs.
Market bulls believe strong demand from overseas buyers and buying by funds who feel prices will pop back up should continue to boost cotton, but bears believe the upcoming U.S. harvest and cotton exports by India should dampen the surge.
Farther out, the steep rise in prices was seen by industry publication Cotlook as leading to a rise in cotton sowings in 2011.