System directories are currently excluded from loading of config files and registration of the watch service, via a constant array of string patterns in YamlConfigurationSourceBuilder.

private static final List<String> SYSTEM_DIRECTORIES = Arrays.asList("META-INF", "WEB-INF", "cache", "docroot", "logs", "repositories*", "tmp");

Besides META-INF and WEB-INF, the others are highly installation dependent.
Therefore we should rather expose them through some mechanism (e.g. magnolia property).