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dominance in dogs

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I have a 5 1/2 month old puppy. it is 3/4 chichuahua and 1/4 poodle. I also have a 12 year old sheltie. the sheltie does NOT enjoy the new puppy. he barked and growled at it until recently. now the sheltie is ALL over the new puppy. like licking it, following it around and trying to stradle and hump it. im not sure what this is about? its like my dog turned gay. my brother said it had to do something with dominance. is that true? and how can I stop it from happening?