This article has been translated from English to Gen Z Slang.
The Elliott Wave Theory ("EWT") is named after the dude Ralph Nelson Elliott. 💁♂️
It's a way of doing technical analysis based on groupthink vibes. 🔮
Elliott, vibing off the Dow Theory and all the cool stuff nature drops, was like, "Yo, these stock movements can get hella predictable if you just peep the wave patterns." 🌊
What's Elliott Wave?
So basically, Elliott Wave is this chill technical analysis system cooked up by Ralph Nelson Elliott. 😎
My guy Elliott figured markets are like, always running the same patterns 'cause of crowd psychology — it’s like everyone’s just vibing along, you feel? 🧠
No matter what chaos hits the markets, Elliott’s investigation was like, "Investors keep doing the same lit boom-and-bust dance—no cap." 🕺💃
Sifting through data from the Dow Jones Industrial Average (DJIA), he realized stock price moves stack up structurally like nature's own symphony. 🎶
Elliott thought that every human move, not just the stock craze, is like these repeatable wave series. 🌊
He hunted down patterns, or “waves,” that repeat in trends but don’t stress about being on time or in tune. ⏰
Then he was like, let me break down how these waves vibe together to make bigger waves, which then become the raw materials for even larger waves. 🤯
With his buddy, C. J. Collins, Elliott’s vibe caught Wall Street’s eye through some killer articles in Financial World magazine back in 1939. 📰
During the '50s and '60s (after Elliott kicked the bucket), his words were picked up by Hamilton Bolton. In 1960, Bolton dropped 'Elliott Wave Principle–A Critical Appraisal'—it was the real deal since Elliott’s time. 📚
By 1978, Robert Prechter and A. J. Frost teamed up to write 'Elliott Wave Principle.' 🤝
Currently, Robert Prechter's still repping Elliott’s vibe and leading a new squad of "Ellioticians", flexing his bars on today's financial markets. 📈
Big names in the game include Prechter, Jack Schwager, and the billionaire boss Paul Tudor Jones. 💰
What’s Elliott Wave Theory Saying?
An Elliott Wave’s got two main vibes:
- The impulse or motive wave
- The reactionary or corrective wave
The impulse wave's all about rolling with the trend, while the corrective vibe pushes against it. 😤
Here’s how it hits:
- When the market's feeling bullish, that impulse wave will flex upward, while the corrective chill heads downward. 📈
- If it's a bearish mood, those impulse vibes cruise downward, but the corrective vibes rise upward. 📉
So, How’s It Work?
The forces behind Elliott Wave Theory are all about building up and tearing down. Think cosmic seesaw. 🚀⬇️
The core principles include:
- Actions popping off create reactions. 🔄
- Five waves vibe with the main trend, followed by three chill correction waves (hello, “5-3” move). ✋🤚
- A 5-3 move caps a cycle and morphs into pieces of a higher-level 5-3 wave. 👆
- The vibe of a 5-3 pattern stays ~forever~, but the tick-tocks of each wave switch up.
The essence lies in eight waves (five going up, three going down), labeled 1, 2, 3, 4, 5, a, b, and c. 🎢
- Waves 1, 3, and 5 are the impulse bangers. 🚀
- Waves 2 and 4 are the chill corrective moves. 🛋️
- Waves a, b, and c course-correct the epic trend set by waves 1 through 5. 🔄
The main trend is all waves 1-5’s jam, either going up or heading down. 📈📉
On the flip, waves a, b, and c will always swerve the opposite direction of waves 1-5. 🌀
Elliott Wave theory’s got the insight down that crowd vibes and mass moods bounce in 5 waves in the big trend, and 3 waves against it. 💫
Once a 5-wave surge in people’s feelings is over, it’s time for the crowd subconscious to reverse engineer itself. Just humans being humans—ain’t no news flash needed. 😅
Wave-ception
Elliott Wave Theory says each wave-ception count’s got a full-on 5-3 sequence of its own lil' universe. 🔄
- The epic wave count is called the Grand Supercycle. These waves hold Supercycles, and Supercycles have Cycles. 🌌
- The chain goes on in Primary, Intermediate, Minute, Minuette, and Sub-Minuette waves. 📊
Check the chart on how 5-3 waves house smol cycles.
This chart’s vibing with the same pattern as the first one, but here, the mini-cycles are on display too. 🔍
Like, peep that impulse wave tagged 1 is just five teeny waves stitched together. 🎨
Here’s some quick math juice: Fibonacci numbers give the Elliott Wave its math cred. ➕🔢
Real talk, Fibonacci numbers start with 1 and keep adding the number before for that new number glow-up (e.g., 0+1=1, 1+1=2, 2+1=3, 3+2=5, 5+3=8, 8+5=13, ya picking up what I'm putting down?). 📚
All Elliott's defined cycles get those vibes from the Fibonacci number playlist. 🎶
Checking the previous chart, Waves 1, 3, and 5 have their own smaller 5-wave groove, while Waves 2 and 4 do the 3-wave correction thing. 🔄
People who vibe with Elliott Wave add up wave counts mixed with Fibonacci numbers to guess at how long and big future market waves will be—from minutes to decades, baby. ⏳
The hot take? Gen Z buzzsaw thinkers say the latest Grand Supercycle kicked off in 1932, with its last hurrah from 1982. 🤔
A lot considered the October '87 crash a curtain call for this cycle. Yet, the fire rebound game convinced them to rethink the vibes. 🔥
This brings us to the soft spot in Elliott Wave Theory. Its future-telling game hinges on keeping an accurate wave count. 😅
Sussing out where one wave ends or starts can be subjective AF. 🤷♂️
Elliott Wave’s a go-to for some of Wall Street’s legendary traders, while others totally ghost it. 🏦🚫