Mean Reversion Analysis
Statistical Overbought/Oversold Signals for Major Market ETFs
Track mean reversion opportunities across SPY, QQQ, and IWM. Mean reversion analysis identifies when prices deviate significantly from their moving averages, signaling potential overbought or oversold conditions. Monitor z-scores to quantify statistical extremes, track price distance from 20/50/200-day moving averages, and analyze MA spread dynamics to identify trend alignment and potential reversal points. These indicators help time entries and exits by highlighting when markets have stretched too far from their mean.
Open Source & Transparent
All data is open source and verifiable on GitHub. We believe in transparency and welcome contributions.
SPY
SPDR S&P 500 ETF Trust
QQQ
Invesco QQQ Trust
IWM
iShares Russell 2000 ETF
Detailed Mean Reversion Analysis
Comprehensive breakdown of price positioning, statistical signals, and MA spread dynamics for each ETF
SPY - SPDR S&P 500 ETF Trust
Tracks S&P 500 Index - Large-cap benchmark (500 companies) | Tracking S&P 500
Price Position Analysis
MA Spread Dynamics
QQQ - Invesco QQQ Trust
Tracks Nasdaq-100 Index - Tech-heavy growth stocks | Tracking Nasdaq-100
Price Position Analysis
MA Spread Dynamics
IWM - iShares Russell 2000 ETF
Tracks Russell 2000 Index - Small-cap benchmark (2000 companies) | Tracking Russell 2000
Price Position Analysis
MA Spread Dynamics
Statistical Mean Reversion Signals
Z-scores measure how many standard deviations price is from each moving average
SPY - Z-Score Analysis
SPDR S&P 500 ETF Trust
QQQ - Z-Score Analysis
Invesco QQQ Trust
IWM - Z-Score Analysis
iShares Russell 2000 ETF
Moving Average Spread Analysis
Z-scores of MA spreads identify extreme separations and potential mean reversion in trend dynamics
SPY - MA Spread Z-Scores
SPDR S&P 500 ETF Trust
- > +2: MAs extremely far apart - expect narrowing/consolidation
- +1 to +2: MAs moderately separated - trend still healthy
- < -2: MAs extremely close - potential breakout/divergence
- -2 to -1: MAs converging - watch for crossover signals
QQQ - MA Spread Z-Scores
Invesco QQQ Trust
- > +2: MAs extremely far apart - expect narrowing/consolidation
- +1 to +2: MAs moderately separated - trend still healthy
- < -2: MAs extremely close - potential breakout/divergence
- -2 to -1: MAs converging - watch for crossover signals
IWM - MA Spread Z-Scores
iShares Russell 2000 ETF
- > +2: MAs extremely far apart - expect narrowing/consolidation
- +1 to +2: MAs moderately separated - trend still healthy
- < -2: MAs extremely close - potential breakout/divergence
- -2 to -1: MAs converging - watch for crossover signals
What is Mean Reversion Trading?
Mean reversion is a financial theory suggesting that asset prices and returns eventually move back toward their historical average or mean. This principle forms the basis of various trading strategies that capitalize on extreme price deviations.
Key Concepts
📊 Price vs Moving Averages
Moving averages (MAs) represent the average price over a specific period. The 20-day MA tracks short-term trends, the 50-day shows intermediate trends, and the 200-day indicates long-term direction. When price deviates significantly from these levels, mean reversion suggests it will eventually return.
📈 Z-Score Analysis
Z-scores measure how many standard deviations price is from its moving average. A z-score of +2 means price is 2 standard deviations above the MA (potentially overbought), while -2 indicates 2 standard deviations below (potentially oversold). Values beyond ±2 represent extreme conditions.
🎯 MA Spread Dynamics
The spread between moving averages reveals trend strength and alignment. Wide spreads indicate strong trends, while narrow or converging spreads suggest consolidation or potential reversals. The 50-200 spread is particularly significant for identifying Golden Crosses (bullish) and Death Crosses (bearish).
⚡ Trend Alignment
When all moving averages align in the same direction (price > 20-MA > 50-MA > 200-MA for bullish, or the inverse for bearish), it signals strong trend conviction. Misalignment suggests uncertainty or transition periods where mean reversion opportunities may arise.
Mean Reversion Trading Strategies
Oversold Bounce Strategy
When z-scores fall below -2 (especially on multiple timeframes simultaneously), price is statistically oversold and may bounce back toward the mean. Look for confluence across 20/50/200-day MAs.
Exit Target: Z-score returns to 0 (price at MA) or resistance levels
Overbought Fade Strategy
When z-scores exceed +2, price has extended significantly above moving averages and may pull back. This strategy works best in ranging markets or after parabolic moves.
Exit Target: Z-score returns to +1 or moving average levels
MA Convergence/Divergence
Monitor MA spread z-scores for extreme narrow or wide spreads. Extremely narrow spreads (< -2) often precede breakouts, while extremely wide spreads (> +2) suggest consolidation ahead.
Wide Spread (> +2): MAs extended - anticipate mean reversion consolidation
How to Interpret This Dashboard
📌 Summary Cards (Top Section)
Quick snapshot of current mean reversion status for each ETF. Focus on:
- Current Price: Real-time price with the underlying index tracked
- Price vs MAs: How far price is from each moving average (percentage and z-score)
- MA Spread Z-Scores: Statistical deviation of MA spreads from historical norms
- Trend Alignment: Overall bullish/bearish alignment of all moving averages
🔍 Detailed Metrics
Comprehensive breakdown with specific signal interpretations:
- Price Position Analysis: Detailed view of each MA relationship with context (e.g., "moderately overbought")
- MA Spread Dynamics: Analysis of MA pair relationships and alignment status
- Signal Context: Interpretation explains what each metric means for trading decisions
📊 Interactive Charts
Three chart sections provide historical context and visual confirmation:
Visualize price movement relative to 20/50/200-day moving averages. Identify support/resistance levels.
Track statistical overbought/oversold zones over time. Background colors show extreme vs normal ranges.
Monitor MA spread z-scores to identify convergence (potential breakouts) and divergence (trend strength).
🎨 Color Coding System
Data Sources: Price and moving average data calculated from daily close prices. Z-scores computed using 252-day rolling statistics.
Updates: Data refreshed daily after market close (Eastern Time).
ETFs Tracked: SPY (S&P 500), QQQ (Nasdaq-100), IWM (Russell 2000)