Wednesday, June 15, 2022

Dow Theory Update for June 15: Primary bear market for U.S. bonds reconfirmed on 6/13/22

Later today or tomorrow follows an update for precious metals and their ETF miners


 General Remarks:

 In this post, I provided a thorough explanation concerning the rationale behind my use of two alternative definitions to appraise secondary reactions.

 TLT is the iShares 20 years + Treasury bond ETF. More about it here

 IEF is the iShares 7-10 years Treasury bond ETF. More about it here.

Thus, TLT tracks longer-term US bonds, whereas IEF tracks middle-term US bonds. A bull market in bonds entails lower interest rates. A bear market in bonds represents higher interest rates.

A) Market situation if one appraises secondary reactions not bound by the three weeks and 1/3 retracement dogma.

The primary trend was signaled as bearish on 1/5/22, as I explained here.

As I explained here, the secondary trend was signaled as bullish (secondary reaction) on 5/25/22. A pullback set up both ETFs for a potential primary bull signal, as explained here. However, the pullback continued lower, and the 5/6/22 closing lows were breached. On 6/10/22, IEF broke downside its 5/6/22 bear market lows. On 6/13/22, TLT provided confirmation. Such a confirmation implies:  

1. The setup for a potential Buy signal has been canceled.

2. The secondary (bullish) reaction against the bear market has been terminated. 

3. The primary bear market has been reconfirmed. So, the odds favor lower prices. 

4. The primary and secondary trends are bearish.

The Table below summarizes the key events from the previous bear market lows (Step 1) to the current breakdown (Step 4):

Below are the updated charts:

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.

The primary trend was signaled as bearish on 9/28/21. A more aggressive and legitimate interpretation would have signaled the bear market on 9/24/21. The explanations here.

In my 12/3/21 post, I wrote that the rallies that had until then developed did not qualify as a secondary reaction. The situation has not changed, as the current rally has not fulfilled the time requirement. Newer lower lows on 6/10/22 by IEF and 6/13/22 by TLT increases the probability for lower prices.



Manuel Blay

Editor of

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