In today's world (not necessarily FOREX related) it is clear the news reflect an increasingly negative social mood. In a weird and unexplained way, both the stock market and the currency market are holding up. Many people claim that the market's failure to "react" to the bad news - or its ability to rally in the face of it - is bullish. This idea is a myth. It is borne of the useful observation that during the early months of a bull market, prices rise despite continuing bad news. Social mood leads social action, so this is a perfectly normal occurrence.
But there is another time when the market goes up while news is bad: during bear market rallies. An excellent example, as detailed in Pioneering Studies in Socio-economics, is the market's rally from September 2001 to March 2002 despite anthrax attacks and the Enron scandal. When those events ended, then the market turned down.
When a bear FOREX (or stock) market is in force, people act in accordance with the long-term deterioration in mood, which continues despite periods of near-term improvement. This "crazy" behavior is nicely coordinated to fool investors, who typically try to make sense of the market in terms of its reaction to news. This is not to say that the stock market can't go up from here; the point is about the validity of analytical techniques.
So basically, both the stock market and the FOREX market aren't really some kind of a bubble, they do tend to be affected by the outside mood, but not in the anticipated way.
But there is another time when the market goes up while news is bad: during bear market rallies. An excellent example, as detailed in Pioneering Studies in Socio-economics, is the market's rally from September 2001 to March 2002 despite anthrax attacks and the Enron scandal. When those events ended, then the market turned down.
When a bear FOREX (or stock) market is in force, people act in accordance with the long-term deterioration in mood, which continues despite periods of near-term improvement. This "crazy" behavior is nicely coordinated to fool investors, who typically try to make sense of the market in terms of its reaction to news. This is not to say that the stock market can't go up from here; the point is about the validity of analytical techniques.
So basically, both the stock market and the FOREX market aren't really some kind of a bubble, they do tend to be affected by the outside mood, but not in the anticipated way.
