Overview: In my June 1st Letter to subscribers, I noted that the two-year Treasury yield was breaking higher and that this would likely exert a negative influence on liquidity.
One of the main casualties appears to have been the gold and silver miners. On 6/9/26, a new bear market was signaled in both GDX and SIL. Gold and silver themselves have also been affected, as I discussed in this post.
Stocks, by contrast, have been affected only modestly so far. The decline has not even been enough to turn the secondary trend bearish. Therefore, both the primary and secondary trends for stocks remain bullish.
General Remarks:
In this post, I elaborate extensively on the rationale behind employing two alternative definitions to evaluate secondary reactions.
SIL refers to the Silver Miners ETF. More information about SIL can be found HERE.
GDX refers to the Gold Miners ETF. More information about GDX can be found HERE.
A) Market situation if one appraises secondary reactions not bound by the three weeks and 1/3 retracement dogma.
As I explained in this post, the trend was signaled as bullish on 6/2/25.
Following a pullback (secondary reaction against the bullish trend), both GDX and SIL experienced a bounce, setting up both ETFs for a potential primary bear market signal. You can find detailed explanations and charts HERE.
The table below gives you all the relevant information:
On 6/5/26, GDX broke down below its 3/20/26 pullback lows (Step #2). On 6/9/26, SIL confirmed by piercing its 3/20/26 closing lows. Since it was a confirmed violation, a primary bear market was signaled according to the Dow Theory.
Check out the chart below for a visual walkthrough of the recent price action. The brown rectangles highlight the secondary reaction (Step #2), the blue rectangles show the rally (Step #3) originating from the secondary reaction lows that set up both ETFs for a potential bear market signal, and the red horizontal lines pinpoint the pullback lows whose joint violation signaled the new bear market. The blue horizontal lines highlight the last recorded primary bull market highs (Step #1), whose upside breakout would signal a new primary bull market.
Thus, both the primary and secondary trends are currently bearish.
B) Market situation if one sticks to the traditional interpretation demanding more than three weeks and 1/3 confirmed retracement to declare a secondary reaction.
As I explained in this post, the trend was signaled as bullish on 6/2/25.
In this instance, the long-term application of the Dow Theory coincides with the shorter-term version, so there was a secondary reaction against the primary bull market, and the setup for a potential bear market signal has been completed. The confirmed violation of the 3/20/26 secondary reaction low triggered a bear market signal.
Thus, both the primary and secondary trends are currently bearish.
Sincerely,
Manuel Blay
Editor of thedowtheory.com
