On a trailing basis, stocks are trading at below average valuations. Over the last twenty years the average PE for the S&P 500 is 20.3; the current level of 15.6 is well below average and at the lower end of the range established by the last two bull markets.
The Wall Street Journal also noted the market's PE this morning (Will Earnings Surprise the Bears), citing valuation as a reason to turn more bullish. Analysts are forecasting earnings growth of 33.6% and 17.9% in 2010 and 2011 respectively. Barring a sudden shock to the market, do not expect this PE ratio to get much lower.