In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery "The Elliott Wave Principle," and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.

The Elliott Wave Principle, developed by Ralph Nelson Elliott in 1930s and 40s, is a powerful analytical tool that is still being used for forecasting stock market behavior. The basic concept of this Principle is that stock market prices rise and fall in distinct patterns and that those patterns can be linked together into waves.