Some stock market bulls are watching a technical indicator for clues on whether a summer rebound in U.S. equities will roll on.

The S&P 500 is up 15% from its mid-June low, a rally that gained even more momentum after Wednesday's U.S. inflation data showed consumer prices unchanged for July. This bolstered the case for the Federal Reserve to end its market-bruising rate hikes sooner than previously expected.

The stock surge, which has delivered the S&P's best eight-week period in more than a year, has brought the index within sight of a 50% retracement of its bear market loss.

Traders are watching the 4,231 level for the S&P 500. Hitting that would mean the benchmark index will have recouped half the losses logged since the drop from its January high.

"In my studies taking out 50% is bullish," Nargis Motorwala, an independent trader based in the San Francisco Bay Area, said.

But the lack of a decent pullback for the S&P 500 in recent weeks, makes it worth treating the signal with caution, she said.

To trigger the signal the S&P 500 has to close above 4,231, Jonathan Krinsky, chief market technician at BTIG, said in a note.

While that does not promise more gains, it could mean the bear market has bottomed if history is any guide.

"Since WWII, every time the S&P recovered 50% of the bear market price decline, while the 500 may have re-tested the prior low, it never set a lower low," Sam Stovall, chief investment strategist at CFRA Research, said.