From a technical perspective, today's surge above May-Oct 2018 resistance at 3.11% is a reaction to very strong recent data showing strong ADP Payrolls for September (230,000 vs. 185,000 expected), and impressive ISM Non-manufacturing data across the Headline data (61.6 vs. 58 expected), as well as the sub-surveys in Business Activity, Prices, Orders and Employment for September.

With 10-year Yield perched at new 7-year highs at 3.17% ahead of Friday's BLS monthly Jobs Report, the set-up for Yield is positioned for upside continuation and acceleration.

While my attached daily chart of 10-year Yield points to a next optimal target zone of 3.25%-3.30%, one look at my attached weekly chart suggests that the outlier, the surprise, could be upside acceleration sooner than later towards 3.40%-3.65%. This implies that the market "sees" perhaps a perfect storm for accelerating Yield -- i.e., continued shortages of labor, upward pressure on wages, anticipated inflation in general goods and services.

The perception here could be that the Fed's gradual rate hike cycle of 25 bps per hike is not aggressive enough to stay in front of the animal spirits unleashed by the Trump tax cuts at the tail end of a super-easy, 8-year period of Fed-directed infusion of massive liquidity.

If such a powerful thrust in Yield unfolds (in reaction to the upcoming Jobs Report), how will the equity market behave? After all, it is in the 9th year of a bull market, and for the past 27 months has climbed along with rising interest rates and a less friendly Federal Reserve. My sense is that the equity markets are becoming much more sensitive to rising rates than most investors believe, especially passive investors.

See charts on the 10-Year T-Note Yield.

Mike Paulenoff is a veteran technical strategist and financial author, and host of MPTrader.com, a live trading room of his market analysis and stock trading alerts.

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