I'm also interested and have been reading about this, or trying to, in the last couple of days.
Kitces mentions it briefly, mainly around adjusting the proportion of stocks to bonds. Eg in this article
https://www.kitces.com/wp-content/uploads/2014/11/Kitces-Report-May-2008.pdfNotice depending on PE10 there is an ideal ratio. Generally its either 80% or 60% (with presumably a trend in between, linear or otherwise). You could "glide" your stocks/bonds ratio based on PE10, adjusting it say once a year (though how often is hard to tell, but obviously taken the normal measures of avoiding capital gains and sticking to addition/withdrawal based AA adjustment, is better).
This Forbes article, by Wade Pfau, actually shows some modelling of doing so based on a simple rule criteria.
http://www.forbes.com/sites/wadepfau/2015/07/09/is-a-high-cape-cause-for-alarm-part-2-valuation-based-asset-allocation/#6bcaeb804079Hard to tell in the article (he is brief) but I'm guessing in his model he reassesses AA annually and then makes the adjustment to 25/50/75 ratio based on where PE10 sits (either "high", "average", "low"). This is a pretty broad, 3-level approach.
Kitces table suggests that a finer rule criteria has merit than such a broad one.
Stocks/bonds aside, Shiller Cape/PE10 ratios can be useful long term predictors (10-15 years) of various equity markets. Eg this German report here is fascinating (and often over-my-head!) reading:
http://www.starcapital.de/files/publikationen/Research_2016-01_Predicting_Stock_Market_Returns_Shiller_CAPE_Keimling.pdfThey publish numbers online here:
http://www.starcapital.de/research/stockmarketvaluationThis would suggest that one could use also glide the AA amongst your various equity ETFs. How much to do so is anyone's guess. If there were no such thing as tax implications (often with home country bias), then the AA of your equity ETFs could be designed to reflect the rough proportions of the total stock market. You could then adjust each a few percent either way based on the current PE10 ratios available. Like the stock/bond ratio, perhaps you could make that adjustment annually.
This all gets even more complicated when you factor in rebalancing your AA. Your AA changes potentially once per year after checking the PE10 (etc) ratios. You then have to rebalance. Or do you? There's plenty of good analysis out there suggesting that using a tolerance band rebalancing method is ideal. SO, lets say you are using a 20% method like suggested here (go down the page):
https://www.kitces.com/blog/best-opportunistic-rebalancing-frequency-time-horizons-vs-tolerance-band-thresholds/If your actual AA is within the tolerance bands of your new glided AA, then you wouldn't have to do any capital stock selling to get to your new target AA. Just keep on going with the addition/withdrawal method but now aiming at your new glided AA.
Hope this makes sense.
I'm still not sure how one would precisely implement all this, particularly with gliding different equity ETFs. Its clearer with the stock/bond ratio as there is data on it.
Also be nice, this is just a thought process :-)