Despite experiencing high yearly growth and reaching new all-time highs earlier this week, the S&P 500 (^GSPC) still has room to grow, a new Bank of America (BAC) Global Research report said.

The recent rally is a sign of a strong summer for the index, according to the report. It confirms “a bullish cup and handle that sets up bullish summer seasonality with upside potential to 4400-4420.”

As of late, market growth has been characterized by a back-and-forth battle between tech-driven growth stocks and cyclical, commodity, and value stocks. The growth stocks underwent a rebound this quarter after a less-than-stellar Q1, and were accounting for a large portion of the stock market growth.

But this week, value stocks, led by cyclical stocks benefiting off improving economic conditions, pushed back against growth stocks’ progress. The former category of stocks accounted for much of the uptick in the SPX Tuesday, which vaulted over the 4,290-point benchmark.

The data from February and March support a bullish month of July, the report found. “The May-June cup and handle resembles the bullish February-March cup and handle pattern that preceded an upside breakout entering the seasonally strong month of April,” analysts said in the report. “Sustaining last week's cup and handle breakout, or holding the SPX supports highlighted above, would bode for the seasonally strong month of July.”

Several indicators support the conclusion that the SPX has room to grow. New lows for the US high yield option adjusted spread (OAS) confirm new highs for the SPX, the report found. “The high yield OAS is below the trough levels from 2020, 2018 and 2014 in the 3.23 to 3.03 area to its lowest level since the 2.50-2.33 range last seen in 2007, 2005 and 1997.”

The report makes a distinction between the performance of the S&P 500 market index and the S&P 500 equal-weighted index, which remains within a bullish trend but did not reach a high last week. “Although this is a lack of confirmation for last week's new highs on the SPX, we are on alert for a breakout from a May-June triangle pattern on SPW,” the report said. “A push above 6170 is the signal needed to confirm the triangle for upside beyond the recent highs near 6185-6206 toward 6445.”

Story continuesTraders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 9, 2020. REUTERS/Bryan R Smith TPX IMAGES OF THE DAY

Not all of the report’s findings were bullish. The authors cautioned of “scary negative levels” of net free credit. As of May 2021, free credit in customers’ cash accounts stood at $213 billion, and free credit in margin accounts stood at $253 billion, while debt balances in customer margin accounts totaled over $860 billion.

“This means that free credit balances net of margin debt (net free credit) moved to a record negative level of -$414b in May,” the report said. “If net free credit begins to rise, it could send a bearish signal for US equities.”

The Global Research report also noted that the Dow Jones Industrial Average (^DJI) and Transportation Average both failed to set new highs last week, resulting in a bearish divergence. “Dow Theory is not bearish but in a corrective phase within a primary bull market,” the authors concluded.

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.

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