One metric in assessing stock market valuation is to compare total stock market capitalization to GNP. From Pragmatic Capitalist is a graph showing the history of stock market capitalization vs GNP:
Apparently this is one of Warren Buffet's favorite valuation metrics and he considers a ratio below 80% a sign of good value. But you can see that the market has had historically high valuations for 20 years now. Notice a peak is in 2000, another lower peak in year 2007 and a yet lower peak now. Today we're back over 100%. To get back to historic valuations, the market would need to drop about 50% to get the ratio back to the historical range! Alternatively, the economy needs to double in size with stock prices remaining constant.
I believe that we're in a secular bear market with a probable duration of 17 years from Year 1999 (similar to 1964 to 1981 where the market went nowhere for 17 years). I also think there's a chance that the market will ultimately drop 60 to 70% to re-attain historic valuations in terms of the above ratio and dividend yields.
Market falls of 70% appear to be common after speculative bubbles (Nasdaq in 2000, Japanese Stocks, China Stocks). Interestingly, the Shanghai Composite index is approaching a 70% decline (not quite but headed that way) from a peak in 2007. It's usually safe to "go into the water" once that magnitude of decline has occurred (except for Japan where the market has declined even further than 70%). Have a look: