* Market rebounds after dipping below $1 a lb

 * USDA sales report encouraging for cotton

 * Long Chinese holiday may thin out trade

 NEW YORK, Sept 30 (Reuters) - Cotton futures scuppered a
short-lived correction to move higher on Thursday on suspected
mill and probably some investment fund buying, with a robust
government sales report further boosting the market, analysts
said.

 The cotton market had finished limited down on Thursday and
follow-through sales by investors seeking to book profits for
the third quarter dragged the market below the psychological $1
a lb level when it opened overnight.

 The dip provided some mills who were still short of
supplies the opportunity to book their orders.

 "Mills like double digit prices, not triple digit (cotton
values)," said Ron Lawson, cotton expert for brokers
logicadvisors.com in Sonoma, California.

 Bill Raffety, an analyst for commodity futures brokerage
Penson GHCO, said people are wary about taking short positions
in cotton given how strong consumer buying is in the market.

 "The demand is still there," he said.

 For the eight time in nine sessions, cotton futures traded
over $1 a lb. Cotton had rallied nearly 50 percent since July,
fueled by demand and buying from investment, hedge and
long-only funds who felt the market was undervalued.

 ICE Futures U.S. key December cotton contract CTZ0 rose
1.05 cents to trade at $1.0229 per lb at 10:07 a.m. EDT (1407
GMT). The contract traded from 99.29 cents to $1.0278.

 The market was buoyed in part by U.S. Agriculture
Department's weekly export sales report on Thursday.

 USDA said total U.S. cotton sales reached 576,600 running
bales (RBs, 500-lbs each), against 571,700 RBs in last week's
data and trade belief it would range from 250,000 to 400,000
RBs.

 Lawson said the report shows that even at higher prices,
mills are booking cotton orders.

 Analysts said the market may drift through the end of the
week because many players will be going to Liverpool to attend
an industry conference.

 More importantly, players in No. 1 cotton producer and
consumer China will be on holiday from Oct. 1 to 7.