Everybody seems pretty convinced that housing is in trouble.
Interest rates are too high. Houses are too expensive. Nobody can afford anything.
The consumer is getting crushed, and apparently the bond market is about to collapse and take the rest of the economy down with it.
Yeah, yeah. We know.
A couple of weeks ago, I wrote about the latest cover of The Economist, which asked a very important question: Will Bonds Blow Up?
Beautiful cover, by the way. One of my favorites.
Since that magazine showed up, Treasury bonds have been ripping higher every day. Funny how that works.
Now, I don’t know whether bonds have put in a major bottom, or whether interest rates are heading much lower.
But I do know that when everybody seems convinced something terrible is about to happen, I start getting interested in what happens if they’re wrong.
Which brings me to housing.
What if the next big move in housing isn’t a collapse?
What if it’s a boom?
I know. Ridiculous, right?
Before anybody starts emailing me about mortgage rates, housing inventory, or how many months of income it takes to buy a house, let me make something very clear.
I don’t care.
I don’t know anything about real estate.
I own some properties. I live in one, and my family vacations in another. That’s about the extent of my expertise.
What I have learned is that owning real estate is incredibly expensive.
There’s always something.
The electricity bill. The internet. Something wrong with the pipes. The washing machine stops working.
Somebody tells me we need to clean the roof.
Clean the roof? What are we even doing up there?
Every time I turn around, there’s another bill for something I didn’t even know needed to be maintained.
So please don’t confuse my enthusiasm about a potential housing boom with some deep understanding of the real estate market.
I’m not a housing expert.
But I do look at a lot of stock charts for a living.
And there’s one chart in particular that I think we all need to be paying attention to right now.
Home Depot Is Back at the Scene of the Crime
I’m talking about Home Depot (HD).
You know Home Depot. It’s where people go when something breaks in their house and they need to spend $400 fixing a problem they thought would cost $40.
It’s a racket.
But that also means Home Depot is one of the most important companies in the stock market when we’re trying to figure out what’s happening with the American consumer and the housing industry.
When people are buying homes, renovating kitchens, building decks, or fixing up their properties, Home Depot is often getting a piece of that spending.
When people start cutting back, the company can feel that, too.
That’s why I pay attention.
Now, Home Depot stock has been getting crushed.
While the major stock market averages have been doing just fine, Home Depot has been one of the big laggards. It’s been falling from its highs while investors have been making money in plenty of other places.
But here’s where things get interesting.
Home Depot is now trading right around the same price where buyers have repeatedly stepped in over the last five years.
We’re talking about the $280 area.
Take a look:
See those green arrows?
Those are all the times Home Depot came down to this same neighborhood and buyers showed up.
We saw it during the 2022 bear market. We saw it again in 2023.
Now, here we are in 2026, right back at the same levels.
But there’s something else I want you to notice.
Look all the way back to 2020 and 2021.
See that little green circle on the left side of the chart?
That’s where Home Depot originally broke out after the COVID crash and started moving higher again.
That old breakout area eventually became the same place where the stock kept finding support years later.
And now we’re back at the scene of the crime.
For five years, investors have been willing to buy Home Depot around these prices.
Will they do it again?
I have no idea.
But if there was ever a perfectly logical place for this stock to stop falling and start moving higher, this would certainly be it.
And I think the answer could tell us a whole lot more than just whether Home Depot is a good stock to own.
What If Everybody’s Wrong About Housing?
Here’s what makes this setup so interesting to me.
The stock market has been doing pretty well despite all the weakness we’ve seen in housing-related stocks.
Think about that.
We’ve had major stock market averages making new highs while companies tied to home construction, renovation, and the consumer have been struggling underneath the surface.
That’s not necessarily a bad thing. Different parts of the market take turns leading and lagging all the time.
But imagine what happens if some of these laggards start turning around.
What if Home Depot stops falling?
What if homebuilders start making new highs?
What if all these companies that have been getting crushed suddenly start participating in the bull market?
Wouldn’t that be interesting?
And what would that tell us about the consumer?
Remember, the stock market is always looking ahead.
Investors are constantly trying to figure out what business conditions might look like six months or a year from now.
So if Home Depot starts ripping higher, I’m going to pay attention.
Not because it guarantees some enormous housing boom is coming. Home Depot sells plenty of things to people who aren’t buying new houses.
But if this stock starts breaking out to new all-time highs after spending years going nowhere, I would have a hard time believing that everything in housing and home improvement is falling apart.
Somebody’s building something. Somebody’s fixing something. Somebody’s spending money somewhere.
And investors would clearly be expecting more of it.
Now, let’s talk about the other side, because that’s just as important.
What if Home Depot doesn’t hold these levels?
What if the stock breaks below $280, stays below there, and completes this enormous topping pattern that has been developing for years?
That’s a completely different conversation.
In that scenario, I want nothing to do with the long side. There’s just too much risk for my blood.
And if one of the most important consumer and housing-related companies in America starts breaking down from a massive five-year top, that’s something we should all be concerned about.
Not just because Home Depot shareholders would be losing money.
But because of what that weakness might be telling us about the broader economy and investors’ willingness to take risk.
That’s why I love this chart so much.
It gives us a very clear level to watch and two very different possibilities depending on what happens next.
Above those lows, I don’t hate the idea of being long Home Depot at all.
We’re buying near a level where buyers have repeatedly shown up, and we have a pretty good idea of where we’d be wrong.
Below those lows, I’m out of the way.
Pretty simple.
And if Home Depot does find support here, gets off the mat, and starts making a serious move higher, I’m going to be looking very closely at the rest of the housing-related stocks.
Because what if this whole idea that the consumer is doomed and housing is about to collapse turns out to be wrong?
What if the next big surprise is that things are actually getting better?
And what if Home Depot eventually breaks out of this enormous base and starts making new all-time highs?
I don’t know about you, but I would have a hard time looking at that and getting bearish on the American consumer.
Maybe we really are heading into another housing boom.
Or maybe Home Depot just bounces from support and nothing particularly exciting happens.
That’s fine too.
I don’t need to know the future to make money in the stock market.
I just need to recognize where the opportunities are, understand where I’m wrong, and pay attention when the market starts telling us something important.
Right now, Home Depot is sitting at one of those places.
And with everybody so worried about housing, interest rates, and the consumer, I think we should at least be open-minded to the possibility that the next big surprise is to the upside.
Wouldn’t that be something?