NEW YORK, Nov 11 (Reuters) - U.S. cotton futures closed
lower Thursday for the second day running due to investor sales
and profit-taking, pressured by lower Chinese cotton prices as
the trade mulled whether the four-month long rally is finally
at an end, analysts said.

Cotton prices had been rallying since July and hit levels
this week that have not been since the U.S. Civil War in the
19th century.

Despite selling off in the last two sessions, the U.S.
cotton market on ICE Futures U.S. is still the top performing
commodity on the Reuters Jefferies Commodity Index this
year, having risen over 80 percent year to date. (Graph:

http://link.reuters.com/kew48n)

The benchmark March cotton contract on ICE Futures
U.S. fell 1.93 cents to end at $1.3918 per lb, dealing from
$1.3666 to $1.428.

The spot December cotton futures lost 1.44 cents to
end at $1.4421. Late index fund rolling narrowed the difference
between the two contracts and pushed December into negative
territory.

'There's a real good chance a top may be at hand,' Mike
Stevens, an independent cotton analyst in Louisiana, said.
He cautioned though that there may still be fireworks in
the spot December contract as players scramble to get out
before notice day for deliveries in less than two weeks.

'It certainly smells and feels like a top,' said Sharon
Johnson, cotton expert at First Capitol Group in Atlanta,
Georgia. 'But everybody feels cautious.'

She said investors are wary because the market had surged
after correcting a few times during its four-month long rally
so no one will jump the gun in declaring the advance dead.
The primary catalyst for the fall on Thursday in U.S.
cotton values were sharply weaker cotton prices in China during
Asian trade.

The Zhengzhou Commodity Exchange's May cotton contract was last
traded Thursday at the session low of 31,345
yuan per tonne, down 1,650 yuan on the day.

Another major factor for the lower market was the increase
in cotton margins to its highest level since 1996 , which
prompted investors who have seen the
market rise nearly 32 cents this month to cash in their gains.

'We've got a lot of money so this a good time to make
profits,' said Johnson.

The market took note of news that China's Central Bank
ordered banks to set aside more money as required reserves, a
tightening step that mops up some of the cash that has been
flowing into commodities markets and posing a growing
inflationary threat.

Chinese cotton traders said cash prices are now running
around the same level as futures prices.

On Friday, the market will take a look at the U.S.
Agriculture Department weekly export sales report to gauge
demand for U.S. cotton despite the current high prices.