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Good evening,

Fundstrat’s Head of Research Tom Lee opened this week’s internal research huddle with a blunt assessment. “The markets were just bleeding every day,” he acknowledged. In his view, some of this had to do with tax-loss harvesting on the part of mutual funds, which mostly end their tax years on October 31. 

“There are all these funds that have incurred huge losses,” he observed, and they’re selling now for tax purposes – to use those losses to offset gains. “This includes bond funds – and this might be the first time they’ve had to do this, because you almost never have losses on bonds,” Lee noted. In his view, “this selling is bleeding into stocks getting pressured, too.” Yet he sees signs that exhaustion is beginning to set in. 

“I'm hopeful of that,” responded Mark Newton, Head of Technical Strategy. “I think that probably is going to be necessary before we can call a true low.” However, Newton doesn’t believe such a low is imminent. “When I look at things like the put-call ratio or traditional sentiment gauges like Investors Intelligence or AAII, most of those have been starting ...

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