Tom Lee: Why stocks will enjoy 'nice' reversal

Tom Lee: Bullish case put to the test right now
Tom Lee: Bullish case put to the test right now

Market swings this year have temporarily quashed the optimistic case for stocks, long-time bull Tom Lee said Tuesday. But as negative sentiment piles up, stocks look poised to mount a stark reversal, he contended.

"I do think there's catalysts, you know, in the next few months developing. And I think that's why it's possible for the market to actually have a really nice rebound," the Fundstrat Global Advisors managing partner and head of global research told CNBC's "Fast Money: Halftime Report."

Lee has maintained optimism for markets even as the has shed more than 7 percent of its value this year. Stocks rose on Tuesday, with major U.S. averages adding 1 percent or more each. Lee believes the rally will continue as trends that weighed on stocks start to dissipate.

Tom Lee
Adam Jeffery | CNBC

The U.S. dollar, which rallied for much of last year and hit U.S. companies that operate abroad, will become less of a problem, Lee argued. The greenback has fallen nearly 2 percent against a trade-weighted basket of currencies this year.

Lee also contended that oil, which has weighed on investor sentiment, "looks better" as prices stabilize with more indications of output freezes from producers. He added that if the high-yield debt market does not weaken more, "that's positive for equities."

Lee touted "value" over growth stocks, contending that bank and health-care stocks look appealing at current levels.

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His outlook is the latest in arguments that selling this year looks overdone. In a Monday note, Goldman Sachs analysts argued that the stock drop, partly driven by concerns about commodities and China, does not seem justified and that the U.S. "is far from recession."

"Systemic risks from oil, China and negative rates are very unlikely," the note said.

Still, other market watchers believe sentiment has not become quite bad enough to justify a reversal for stocks. Nicholas Colas, chief market strategist at Convergex, wrote Friday that markets have not yet shown key indicators of hitting a bottom.

"First, when the S&P 500 drops 5 percent or more in one day. Second, when the CBOE VIX Index tops 40. And third, when everything sells off for a few days and correlations for all equities approaches one," Colas said. "None of these events have yet occurred. And so we wait."

CNBC's Matt Clinch and Alex Rosenberg contributed to this report.