Resource exploration stocks are notoriously volatile. Fear and greed play out in this sector like few others. Stocks tend to go irrationally high and stupidly low. And therein lies the opportunity.

I’m no math wizard but I know enough to not buy state sponsored lottery tickets. Your odds are much better when you buy your tickets via the natural resource sector where you can stack the deck in your favor and make life changing money.

BHP Billiton Ltd. (NYSE:BHP) is getting stronger, says Horacio Marquez, even as commodity prices slump. With its low costs and diversified operations, the natural resources producer is well positioned to ride out the credit crisis. And when commodity prices rebound next year, Horacio says BHP will lead the recovery. He recommends buying shares at today’s distressed prices, and holding for big long-term profits.

Commodities will rebound in the New Year, says Martin Hutchinson. Supply and demand fundamentals remain bullish for natural resources. Even more importantly, massive increases in the money supply will create inflation, against which hard assets are an important hedge. Martin gives five ways to play this trend in 2009.

Some commodities are due a strong rebound, says Manraaj Singh. The underlying fundamentals are largely unchanged from July, when many resources were posting record highs. Manraaj says crude oil prices could double by the end of 2009, while agricultural prices will also soar.

Gloomy economic picture fuels risk aversion… Financials, energy, retailers among top drags… Dow off 4.3 pct, S&P 500 off 5 pct, Nasdaq off 5.3 pct

City fashion is a dangerous thing. Its followers rarely come out smiling. So although there is a chorus now calling for mergers and acquisitions in the small company sector, this seems more to do with fund managers’ concerns about illiquid stocks than any commercial rationale.

Value will win out in the end, says Chris Mayer. Nearly every asset class has been taken down by this credit crisis. But the wide gaps between stock prices and tangible business value will close. That’s why Chris says investors should get ready for a major rally in resource stocks.

The Canadian markets made it two winning days in a row as investors scurried to buy beaten down resource stocks. For the tale of the tape, the TSX Exchange rallied 3.82%, while the TSX Gold Index surged another 8.5% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, added 5.14% with the advancing issuers swamping the decliners by a 595 to 256 margin on volume of 160 million shares traded.

Global markets are soaring today on renewed bailout efforts. But Irwin Greenstein says its probably not a good idea to jump back in to these emerging markets just yet. As always, China will be the bellwether for a sustainable recovery. And commodity prices will remain crucial for resource-rich nations.