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 to improve our tools.
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
Mean Reversion: How to Read the Signals
Use z-scores, price-vs-MA distance, and moving-average spreads to understand when markets are stretchedâand when trend conditions may overpower mean reversion.
General Overview
Mean reversion tries to quantify how far price has moved away from typical levels (often moving averages) and whether that move is statistically unusual.
This dashboard focuses on three lenses: (1) distance from 20/50/200-day MAs, (2) z-scores to standardize âhow extremeâ a move is, and (3) MA spreads to interpret trend alignment and compression.
Detailed Breakdown
A practical workflow: identify extremes, check trend alignment, then decide whether youâre looking at a pullback opportunity or a trend that may persist.
Price vs moving averages
How stretched is price?
- 20-day MA: short-term momentum and âsnapbackâ potential.
- 50-day MA: swing trend reference and common pullback target.
- 200-day MA: regime filter; distance here often matters most for risk framing.
Z-scores (standardized extremes)
How unusual is the deviation?
- Higher absolute z-scores indicate more statistically extreme conditions.
- Use z-scores to compare extremes across ETFs/time windows more consistently.
- Extremes are contextânot timing signalsâconfirm with structure and risk plan.
MA spreads & alignment
Trend strength vs reversion odds
- Widening spreads can indicate strong trends (reversion can be delayed).
- Tight spreads can indicate compression (breakout risk increases).
- Alignment (price > 20 > 50 > 200 or inverse) often reduces mean-reversion edge.
FAQ
What is mean reversion in markets? âŒ
Mean reversion is the idea that prices tend to move back toward a typical level (a âmeanâ) after large deviations. In practice, it helps frame overbought/oversold conditions relative to moving averages and historical volatility.
What does a z-score tell me on this dashboard? âŒ
A z-score measures how extreme the current deviation is compared to recent history (in standard deviations). Larger absolute values imply a more unusual move relative to the trailing distribution.
How should I interpret âprice vs moving averagesâ? âŒ
It shows how far price is from the 20/50/200-day moving averages. Larger distances can signal stretched conditions, but trend context mattersâstrong trends can stay stretched longer than expected.
When do mean reversion signals fail? âŒ
They often fail (or take longer) during strong trending regimes, major news cycles, or volatility shocks. âOverboughtâ and âoversoldâ can persist when momentum is strong.
How can I use MA spread metrics? âŒ
MA spreads help you understand trend alignment and compression/expansion. Tightening spreads can precede breakouts; widening spreads can indicate strong trends but also higher risk of snapback.
Important Considerations
- Mean reversion works best in range-bound markets; strong trends can overpower it for long stretches.
- Use multiple confirmations (trend, breadth, volatility, key levels) before acting on âextremesâ.
- Z-scores and percent distances are sensitive to the lookback window and volatility regime.
- Define invalidation and size risk firstâsignals are educational and probabilistic.
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)