Their computer sells stuff and then buys stocks that are heavily correlated to the sold stock.

Later, it unwinds the imbalance to avoid realized gains and wash sales. Doing that without impacting long-term returns is one of their biggest value adds.

My point is that even if it was literally the same stock, unless you know that you bought at the relative bottom all you’re doing is needlessly incurring loses.

For example you’re better off just buying the dip, then selling, and paying taxes (even with harvesting) and repurchasing assuming the stock recovers and you don’t mind fronting the capital

You can do it using basket ETFs. The IRS doesn't consider them "exact" replicas. So if VOO drops, you can harvest using SPY and maintain the same exposure, then switch back to VOO a month + few days later.

It gets harder to pull that off once you’re a long-term holder

Hence the emphasis on cycling things around. You’re not trying to cut and run, but retain exposure while crystallizing the loss.

I’m not in US, but what are the rules about buying back a stock that you just sold?

In Canada, it’s a 30d wait for the loss to count, but you can buy back another similar company/index the next minute and your loss still counts.

If the price of oil craters and you sell your -10% Exxon and buy -10% Chevron, you’re not timing the market but you are crystallizing a loss.

Or change between Solactive and MSCI-based index funds because they’re “only” 95% identical.