Skechers USA (SKX) may have just saved the retail sector.

SKX – a shoe company that sells its products through specialty, department, and sporting goods stores as well as in its own company stores and online – has been having a tough year.

That’s no surprise. Just about every company related to retail, and subject to the competitive pressures of Amazon (AMZN), has been having a tough year.

But SKX singlehandedly raised the retail sector from the dead on Friday. SKX announced earnings that were far better than expectations. The company reported a terrific back-to-school season. And management said it was looking forward to a strong holiday season.

SKX rallied 42% on Friday. That is an absolutely insane reaction to an earnings report. And it’s a good illustration of just how beaten-down, oversold, and left for dead the entire retail sector had become.

Skechers had a great day on Friday. But it’s also worth noting that just about every other retailer had a great day as well.

For example, Dick’s Sporting Goods (DKS) rallied 2.6%. That’s more than five times the 0.5% gain in the S&P 500. Macy’s (M) – that tired, old department store that is almost universally despised on Wall Street – popped almost 5% higher on Friday.

Of course, we don’t want to get too excited over just one good day. Retail stocks have been horrible performers this year. It’s going to take quite a few good days to catch up to the run in the S&P 500.

Friday was a good start. Now the sector has to add to that action over the next week or two.

There are several more retail stocks set to report earnings in the coming days – including Deckers Outdoor (DECK), Columbia Sportswear (COLM), and Under Armour (UAA). If we get more positive talk about the back-to-school season, and more positive expectations from these companies for the coming holiday season, then we’ll likely see an even stronger rally in the retail sector.

It’s also worth noting that on Friday – a day when every major stock market index hit new highs, and when the retail sector was leading the way higher – the largest and best-performing retail stock this year, AMZN, was actually down on the day.

Could it be possible that the retail pendulum is starting to swing in the other direction? Have we finally seen the bottom in stocks like Dick’s Sporting Goods and Macy’s? And have we seen the top in Amazon?

We’ll know within a few weeks.

Best regards and good trading,

Jeff Clark

P.S. Many readers have asked about my thoughts on the cryptocurrency space…

For those who are curious about these assets, keep an eye on the Market Minute through this week. I’ll send you my thoughts, and some information on how you can get involved, very soon…

Reader Mailbag

Have you ever been on the side of a winning turnaround like retail had? What trades have you made in the past that experienced a sharp recovery like we saw in retail on Friday?

We always love to hear your trading stories and experiences. As always, you can send those – along with any questions, comments, or suggestions – right here.

Regarding your Market Minute on volatility—your explanation was very helpful and just in the nick of time. I've accumulated a list of some stocks I wish to buy and spent the weekend figuring out (estimating) the lowest price likely over the next few weeks for each based on Bollinger Bands, moving average convergence divergence (MACD), Relative Strength Index (RSI), exponential moving average, as well as my own favorite, the High-Low price chart across different timeframes, to determine estimated future range.

Based on your article, I re-evaluated some to ensure they're low enough for a more volatile week because I think your historically based intuition is probable (but not certain). Good trading is about probabilities as well as risk mitigation.

I really appreciate all your extra market analysis since trading options is just part of our overall profit/risk management investment strategy.

–  Tim G.