This is going to be hard on you, but it's better to have this in the past than to keep mopping up.
That soil is plain wrong, it looks packed, it has little to no aeration, it holds water for too long.
What you'd want is a coarse medium, something rocky (there's entire debates about it, google around a little because asking it on forums tends to yield equally contradicting results). Go with something that people have been using for a while with good results. This doesn't mean it has to be expensive or super special, it just has to be better than potting soil. In small pots like ours, potting soil is poison with just a few exceptions. Basically every (true!) bonsai soil would do, at least, that's what I read about elms.
The foliage balling up is most likely due to water issues combined with excess nitrogen. Switching to bonsai soil would fix those issues in a single go, but it does mean that at some point, you'll need to fertilize. Don't do that until the tree shows it needs it. But first things first, start with a better soil. In two months, start thinking about the next step to full recovery, depending on it's state.
People are going to tell you that bonsai is an outdoor sport. It is. I can't do anything about that. You could do it indoors, but that's an entire different branch of keeping plants. Most bonsaiists don't do it a lot, because it's actually harder than it looks and it takes constant monitoring and adjustments. Outdoors is pretty much the opposite.