The Price/Earnings ratio is a common measure of whether the overall stock market is undervalued or overvalued. The average Price/Earnings ratio tends to be in the 15-20 range historically. If the current Price/Earnings ratio is 25 you would say that the overall stock market is:

A. valued properly stock prices will grow at a relatively constant rate for the next 6 months
B. undervalued for some reason stocks are trading for prices below average; now may be a good time to purchase stocks while they are on sale
C. overvalued watch for the growth in stock prices to slow down or turn negative in the upcoming months.