With the S&P currently trading at 16x forward earnings, the S&P's forward P/E is right around its 15 year average and higher than its 5- and 10-year averages.
Forward P/E ratio for $SPX of 16.0 is above 5- (13.5) and 10-year (14.1) averages, but below 15-year average (16.2). http://t.co/EKpxudMmWn
— FactSet (@FactSet) November 21, 2014
Since early October of 2014, the S&P's forward 12-month EPS estimate fell from about 129.5 to 128.5 today, which the market efficiently priced in before it occurred. What's interesting now is the market bounced back, but the forward EPS estimate stayed put. So the market is riding on P/E expansion at the moment.
During the next correction, it will be very important to to see if there's a steep divergence between the S&P and its forward EPS estimate. A steep bearish divergence could mean that a bear market is right around the corner. Look what happened in 2007.
These charts are courtesy of FactSet. I just subscribed to a bunch of their reports at their Research Desk.