NEW YORK, Dec 22 (Reuters) - U.S. cotton futures ended down
the 5-cent daily limit on Wednesday on profit-taking and
investor liquidation one day after the market hit a record top,
and analysts believe cotton may see follow-through pressure
before the long Christmas break.

The market will be closed on Friday and reopen on Monday at
7:30 a.m. EST (1230 GMT).

The key March cotton contract on ICE Futures U.S.
fell the 5-cent limit to finish at $1.5412 per lb.

After finishing limit up the last two sessions, the market
headed the other way on Wednesday. Cotton's performance called
to mind its performance on Nov. 10, when it traded the daily
limit up before finishing almost limit down.

Cotton is still the best performing commodity in the
Reuters-Jefferies commodity index, up almost 85 percent year to
date. (Graphic: http://link.reuters.com/kew48n)

Sharon Johnson, senior cotton analyst at commodities
brokerage Penson Futures, said fiber contracts came off because
cotton was 'technically overbought,' so investors opted to
liquidate their positions.

She said the market also took its cue from weaker Chinese
cotton prices.

The May cotton contract on the Zhengzhou Commodity
Exchange last traded 1,135 yuan lower on the day at 27,640 yuan
per tonne.

'A widespread, long-lasting tumble in prices is unlikely,
given the high inflation in China,' said a Shanghai-based
trader. 'But we may see some correction as prices have rallied
quite a bit.'

The volume of business in the U.S. cotton market, though,
was well below the norm. Total volume traded was around 9,400
lots, about three-quarters below the 30-day average of 37,400
lots, Thomson Reuters preliminary data showed.

Some analysts believe the market's outlook is still
bullish.

'The cotton market has shown unbelievable strength,' said
Luke Matthews, a commodity strategist at the Commonwealth Bank
of Australia. 'It is a continuation of those themes -- that is
extraordinary tight cotton supplies -- which are going to
persist in the near term.'

India, the world's second-biggest producer and exporter of
cotton, will allow exports of 2.5 million bales in 2010/11,
Trade Minister Anand Sharma said on Tuesday.
That is short of an earlier announcement that India would
export 5.5 million bales.

Options trading in the cotton market was halted for the
third day running because the spot month in the cotton futures
market traded at its daily limit, ICE Futures U.S. said.

To view the statement, please click on:

(https://www.theice.com/publicdocs/futures_us/exchange_notices/ExNot122010CtOptHalt12.22.10.pdf)

The market will also be waiting for the release Thursday of
the U.S. Agriculture Department's weekly export sales report.