According to Elliott, all the market cycles actually are results of the investors' reactions to outside influences, or predominant psychology of the masses at the time. He found that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided further into patterns he termed "waves".
The Elliott Wave Theory
The Elliott Wave Theory is based on a certain cyclic laws in human behavior psychology. According to Elliott, the market price behavior can be clearly estimated and shown in the chart as waves (wave is here an explicit price move). In the most simple and crude terms, the pattern he identified was of a 5 segment zig-zag that makes up all impulse (direction of the trend) moves and a 3 segment zig-zag that characterises all corrective moves. As if the phenomena seen was some sort of rhythmical ebb and flow like an ocean, he named these moves as waves. Fibonacci ratios are commonly associated with the number of waves and the distance that they travel. The Elliott Wave Theory says that the market can be in two large phases: Bull Market and Bear Market.