The S&P 500 index is down 6.2% from the year's high of 1,465 on Sept. 14. It is up 9.3% year-to-date. It could certainly rebound 6.6% to the year's high if the fiscal cliff is averted. I'm not sure there's enough time to do much better than that. So breaking out to a record high might have to wait until next year.

Once again 13 is turning out to be an unlucky number for the forward price-earnings ratio of the S&P 500. The latest and the previous two rallies in the S&P 500 since mid-2010 hit a brick wall when the P/E rebounded to about 13. Since peaking at 13.1 on Sept. 14, the P/E has dropped to 12.3. Over this same period, the forward P/E of the S&P 400 MidCap index fell to 14 from 14.8, and the S&P 600 SmallCap index forward P/E dropped to 14.4 from 15.9.

The market hit the year's high the day after the Fed announced QE3 on Sept. 13. The rally stalled as investors awaited the Nov. 6 election results. The S&P 500 is down 3.8% since last Tuesday's close, after investors apparently concluded the odds of going over the cliff had just increased. If that doesn't happen, stocks are cheap and the P/E could easily rebound, maybe even above 13. If it does happen, the previous low for the P/E was 10.2.

Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.