While long-term commodity prospects are dictated by supply and demand, weather factors and long-term fundamentals, the short-term outlook is sprinkled with volatility. Some commodities have hit levels not seen in some time, reinforcing a new trend of late: The relationship between commodities and the general stock market.

It hasn’t always been the case that commodities and stocks moved in the same direction, but nothing is immune to a price shock these days. And when one domino moves, it can take many others with it.

We don’t foresee much change in this inter connected stocks-commodities relationship until all the recent government intervention takes a strong foothold.

So let’s turn to some commentary…

The Macroeconomic And Technical Outlook For Oil

Over the past three weeks, we’ve seen crude oil futures trade in a wide range between $47 and $54 per barrel.

Macroeconomically, we still have the issue of dwindling worldwide demand versus over-supply. The OPEC oil cartel has tried to arrest the latter by cutting supplies recently, but this trend could keep a lid on prices for the time being.

Although many market participants don’t give much credit to OPEC these days in terms of following through on their commitments, the psychological impact of better days ahead due to the U.S. government intervention can cause quick pops to the upside.

Technically, the oil market has support at the $47.75 area, right around the 50-day moving average. And if the price can break out above $55 convincingly, we could see some clear sailing for oil, possibly up to the $70 per barrel range.

For now, expect to see crude oil trade in a large range between $30 and $60.

As Natural Gas Drifts Lower, Our Optimism Rises Higher

The natural gas market keeps slowly eroding away to lower and lower levels.

Each week, we hear the Energy Administration Information report that that there’s an abundance of underground storage supplies of natural gas – and this, in combination with slack demand, is what’s keeping natgas heading south.

However, the lower this market gets, the greater the buying opportunity will be. We’ve been bullish on the natural gas market for a few months now, and although it’s moved against us recently, we continue to like it for the long-term – particularly with hurricane season around the corner.

I’ve consequently implemented a special options strategy in my Instant Money Trader service that enables investors to get into natural gas at even lower prices than current levels. For more information on how you can join in, click here to read a short guide on the service.

Gold And Silver Nail Our Support Levels… And Bounce Higher

In my column two weeks ago, I noted:

We don’t see the front-month gold futures (June contract) trading much below $870 an ounce after the current pull-back is over, and silver shouldn’t see anything much below $12 an ounce (May contract).

Right on cue, June gold futures tagged a low price of $865 an ounce last week and have since bounced off the very reliable 200-day moving average. The price jumped over $35 an ounce to hit $901 just this morning.

It’s a similar story in the silver market. The metal tagged support just above the $12 per ounce level and has rebounded almost a full dollar to its current level of $12.80 an ounce.

Now that the recent pullback seems to have ended right at those support levels, we have more reason to maintain our longer-term bullish stance on gold and silver. And the current area looks to be a great spot to dip into long positions.

Other than looking at limited-risk option strategies from the COMEX futures options market (where gold & silver futures options trade), you can buy outright shares of the gold and silver ETFs that track the price performance – the SPDR Gold Trust (NYSE: GLD) and iShares Silver Trust (NYSE: SLV) respectively.

Has This Hurricane-Hating Commodity Touched New Lows?

Lastly, we’re continuing to track the longer-term orange juice charts, as the price flirts with multi-year lows not seen since before hurricanes tacked on huge weather premiums to the price in 2004.

It looks like the market may have touched its near-term lows – and with a decent bullish move over the past two weeks, it could now be gearing up for the psychological and speculative fever that comes with the onset of hurricane season.

The best way to take advantage of this situation is through limited-risk bullish trades on orange juice futures options.

Source:  Prepare To Buy These Two Hurricane-Hating Commodities

As the U.S. economy decelerates, pummeled by the aftershocks of the worldwide financial crisis, consumers have been hit from every direction: Unemployment has spiked, and will continue to rise, economy unwinds and continues to work through the aftershocks of the global credit crisis, consumers have been beset on all sides. Unemployment is up, home prices are down, and credit is hard to come by.

And although inflation is beginning to moderate somewhat – slowing to a pace of 3.7% year-over-year in October – it’s still well above the U.S. Federal Reserve’s desired target rate of 2.0%.

With rampant inflation no longer artificially propping up consumer spending figures, retail sales have really started to lose their luster. Sales figures are based on the value of goods sold – not the volume – so the recent decline commodity and energy prices will translate into a sharp decline in retail sales.

That decline will be dreadfully apparent in this year’s holiday sales, but it will also carry into 2009. The question, now, is how much worse consumer behavior will get.

“The great unknown is just how much lower can consumer spending go?” Piper Jaffray Cos. (PJC) analyst Jeff Klinefelter told Reuters. “With savings rates at historic lows and constraints on the availability of consumer credit, I just think there’s concern that the perfect storm is brewing.”

According to the Fed, a recession is already under way in the United States. Gross domestic product (GDP) shrank 0.5% in the third quarter, and the Fed predicts the economy will continue to contract in the first six months of 2009, and possibly beyond.

Tighter credit standards and lower home prices mean consumers have less of an ability to finance their purchases through debt. And even those with cash to spend are opting to save instead, as the economic outlook continues to dim. Would-be consumers are also scrambling to rebuild savings that were decimated by a bear market that has dragged the Standard & Poor’s 500 Index down more than 40% this year.

“We expect to see consumer spending to be flat before inflation,” Gus Faucher, chief U.S. economist with Moody’s Economy.com (MCO), told the Los Angles Times. That means once inflation is factored in, consumer spending will see a sharp decline in 2009, and retail sales will be left to twist in the wind.

Retail Laggards

According to a recent retail outlook report from Fitch Ratings Inc., personal consumption expenditures are projected to decline 1.6% in 2009.

A wave of consolidation and bankruptcies will spread through the retail sector as weaker chains fail and stronger brands shut down underperforming stores. Department stores and specialty stores will be hit especially hard, as consumers cut back on discretionary purchases in favor of staples.

Bankruptcies of stores such as Sharper Image Corp. (OTC: SHRPQ) and Circuit City Stores Inc. (OTC: CCTYQ) are having a negative effect on the sale of gift cards, which stores traditionally have counted on to boost sales after the holiday season. Gift card purchases are tallied when the card is redeemed, not when the card is purchased. In the past, the sale of gift cards have given New Year sales a healthy boost as gift card recipients go shopping after the holidays are over.

But consumers are wary of getting left holding onto worthless cards while bankruptcy courts decide how to divvy up assets.

For the 2007 holiday season, 70% of consumers purchased gift cards. This holiday season, just 40% of consumers are projected to go the gift card route. And that’s going to weigh down sales and profits for the 2009 first quarter.

“I think you will see a six-point drop in sales for those first three months,” C. Britt Beemer, chief executive officer of America’s Research Group and author of “The Customer Rules,” told CRM Magazine.

Troubles Beyond the Big Brick-and Mortar Stores

While the big chains are struggling and grabbing the bulk of the headlines, small business owners are barely getting by. That might not seem like a big deal if the stock market is your focus, but small-businesses are integral to the economy.

According to the Small Business Administration, businesses with less than 500 employees account for almost half of private-sector employment. A recent National Federation of Independent Business survey showed 15% of small business owners anticipate layoffs in 2009, which will put even more strain on an already weak U.S. labor market.

And small business layoffs mean slower sales for big box stores like Best Buy Co. Inc. (BBY) and Target Corp. (TGT) as another wave of unemployed workers grapple with lost income.

Online retailers are starting to feel the pinch, too. Web sales have been one of the fastest growing retail sectors for years, but popular sites such as Zappos.com Inc., the No. 1 online shoe retailer, and QVC Inc., which sells online and on television, have each announced layoffs, as well as declining sales.

Amazon.com Inc. (AMZN), the top online retailer, also is struggling. Amazon’s stock is down 55% year-to-date, and the outlook is grim.

“[Amazon is] seeing a slowdown in their business that shouldn’t really shock anybody,” Jeffrey Matthews, a general partner at hedge fund Ram Partners LP in Greenwich, Conn., told Bloomberg. “They sell books. They sell movies. They sell blenders. They don’t sell magic potions or the fountain of youth.”

Retail’s Bright Spots

There are a few retailers that – while they don’t sell magic potions or the fountain of youth – have managed to position themselves as offering more value for the money, which has allowed them to buck this downward spiral in consumer spending have managed to buck dismal consumer spending. And that focus on value will continue in 2009.

The best example of this value exception is the world’s largest retailer: Wal-Mart Stores Inc. (WMT).

“This is Wal-Mart time,” Chief Executive Officer H. Lee Scott Jr. told Wall Street analysts during an Oct. 27 presentation at company headquarters in Bentonville, Ark., BusinessWeek reported. “This is the kind of environment that Sam Walton built this company for.”

The economic slump has found Wal-Mart returning to the basic strategies that the late founder made famous. The retail titan has given up on the brand-name designer strategy of competitors such as Target and Kohl’s Corp. (KSS) to offer rock-bottom prices on hundreds of consumer staples.

That bodes well, as consumers will continue to stretch household budgets and consolidate trips to save on gas.

“It is a great time to be Wal-Mart,” Howard Davidowitz, chairman of Davidowitz & Associates, told Bloomberg News. “It sells everything you need cheap.”

Stores like Wal-Mart, that can capitalize on this new value-seeking behavior will be able to turn a profit even in this bleak retail environment. And those that can’t, will be bought out or disappear.

Source: Retail Sales to Suffer in 2009 as U.S. Consumers Curtail Spending

Editor’s Note: This is the seventh installment of our “Outlook 2009” series, which is detailing the global investing outlook for 2009.