What's the Big Noise About?

Trader filled world we live in today. World we live in today is filled with traders.
It's a giant-ass paradox. They make the world run, as they are the people who move stocks around, but their mentality makes the world sink.
Or do they?

One argument that I always hear is that you have to react to the market. The argument goes that you can't ignore the market because you are measured against it constantly. This is the reason behind index holding, overweight/underweighting and the sorts.

I do see some merits in that - although I think better course of action would be to stop comparing the firm's performance against the index. IMO, that fuels mediocrity as all you end up trying to do is outdo the average. But I also realize that the world can't run with everyone trying to be elite. Even if that were the case, then the elite will be mediocre, and I'd be complaining about the exact same thing.

Whenever I see the following headlines though, I cringe.

Corn Slides on Better Weather Forecast (ROB)
Aluminum prices surged to a 4-month high on Monday as investors bet on higher prices of the energy-intensive metal amid escalating worries about power problems in China, the world's largest producer. (ROB)

The foremost question that pops into my head is "Do they think the effect will be permanent?" The question after that usually is "What kind of immaculate brain do these guys have working on the trading floor in order to calculate these things to the "precision" they do?" War, weather, power outage and so on - these are things that are uncontrollable and extremely volatile. So how is it that price moves so much when these news come up? I can understand that they might have short term effect, but I don't understand how it can cause massive volatility. Arguably, the price is based on demand and supply, and things like good weather will increase supply. But how permanent will these effects be? What are some of the assumptions that these traders are making when they change the bid/ask?

Value investing doctrine will tell you that they are being irrational - being misguided by psychological depression/mania and so on. But if that was the case, why is it that we don't learn? Why is it that we can't just ignore these short term movements instead of participating in them and turning it into a supercycle/boom/bust? Or, ARE we learning?

Is the ability to ignore market crucial? (ala Mr. Market) I'm in a very confused mood today.