Confluences

Mean Reversion Index Confluences

Mean reversion signals are incredibly potent, but they carry inherent risk if traded blindly. The Mean Reversion Index should be combined with tools that confirm momentum shifts.

• Bullish Divergences: A drop into the -2σ Buy Zone is a macro signal. Look for RSI or MACD bullish divergences on lower timeframes (e.g., 4H or 1D) within that Buy Zone to time your exact entry.
• Support and Resistance: If the asset enters the -2σ Buy Zone exactly as it tests a multi-year structural support level or a major liquidity pool, the probability of a successful mean reversion trade skyrockets.
• Macro Sentiment: Pair this with the Macro Credit Model or Sector ETF Flows. If the Mean Reversion Index is in a Buy Zone but macro credit spreads are still blowing out into "Stress," be patient. Wait for credit markets to stabilize before buying the dip.