* Cotton falls further from last week's peak of 77.49 cts/lb
* Selling may drag market back toward 70-ct level
* Chinese cotton sales, weak manufacturing data weighs

NEW YORK, Sept 5 (Reuters) - Cotton futures fell for a
second-straight day on Wednesday, pressured by poor fundamental
demand prospects and a weaker technical picture that may work to
values down toward the 70-cent level.
Limited damage from Hurricane Isaac to crops in Mississippi
and Louisiana, key U.S. cotton states, left the market
vulnerable after rallying last week to 77.49 cents per lb, its
priciest level in three months.
"It left it technically vulnerable because we couldn't reach
that high. All we did was establish the high-end of the trading
range," said Mike Stevens, an independent cotton analyst based
in Mandeville, Louisiana.
News over the weekend of Chinese cotton sales and weaker
manufacturing data in China and the United States only added to
this week's negative reversal.
"The market had nothing bullish to feed itself on so if
cotton can't go up, it's going to try and come back down,"
Stevens said.
The benchmark December cotton contract shed 0.33 cent
to settle at 75.35 cents per lb, after moving between 74.80 and
76.00 cents.
"Obviously, it is still an oversold market so the correction
this month is not expected to be a deal breaker for a larger
rally effort. Our expectation is for the market to stay above
71.00 on this next dip," Knight Futures analysts said in a
research note on Tuesday.
ICE cotton futures volumes stood above 15,000 lots in late
New York business, nearly 40 percent below the 30-day norm,
according to preliminary Thomson Reuters data.
The U.S. Agriculture Department's weekly crop progress
report showed 42 percent of U.S. cotton was "good" or
"excellent", down 1 percentage point from the previous week, but
considerably better than the 28 percent in 2011.