Elliott Wave Theory proposes that financial markets move in predictable wave patterns driven by collective investor psychology. The basic structure consists of five impulse waves (three in the trend direction, two corrections) followed by three corrective waves (labeled A-B-C). This 5-3 pattern repeats at every timeframe — from minutes to decades — creating a fractal structure where smaller patterns nest within larger ones.
The theory identifies specific rules: Wave 2 never retraces more than 100% of Wave 1. Wave 3 is never the shortest impulse wave. Wave 4 does not overlap with Wave 1's territory (in most cases). These constraints make the framework falsifiable — if a rule is violated, the count is wrong. Closelook applies Elliott Wave analysis primarily to Bitcoin and the Nasdaq composite, where crowd psychology drives price action more visibly than in individual stocks. The Weekly Signal uses wave positioning as one of nine quantitative dimensions, providing context for whether the current move is impulsive or corrective.
Elliott Wave Theory provides a structural framework for understanding where markets are in their psychological cycle. Five-wave impulse moves capture the progression from early adopter optimism through euphoric blow-off tops. Three-wave corrections map the fear, capitulation, and false-hope sequences that follow. The fractal nature means patterns repeat at every timeframe — from intraday to multi-decade.
Closelook applies Elliott Wave analysis as one dimension within the Weekly Signal framework, specifically for Bitcoin and technology indices. The wave count provides context for other indicators: a momentum divergence in wave 5 is far more significant than the same divergence in wave 3. The theory is most useful not for precise price targets but for identifying which phase of the cycle we are in — and therefore which strategies are appropriate.
Elliott Wave analysis is integrated into the Weekly Signal framework, interacts with Market Regime scoring, and is applied alongside the VIX for timing entries and exits.
