Personally I believe PE ratios will stabilize somewhat above the usual 14 or so, but well below where they are now. A few months more bleeding, then a few months of stagnation.
PE ratios have gotten worse over the last two years even as the markets have been dropping. Corporate profits are shrinking faster than any three years since the 1930's. In fact, the primary driver of profits for the past two years has been cost-cutting (layoffs and write downs of bad investments). Until those profits start increasing there will be no recovery.