The continuing Greek crisis could lead to extraordinary volatility this week.
In addition, there is potential stress on the China front.
The Chinese authorities are taking extraordinary measures to ramp up the stock market, which has lost 30 per cent in three weeks.
However, the Indian market responded positively on Monday, recovering after opening low as the results of the Greek referendum came in.
China also saw gains, although there was a lot of selling in the second half of Shanghai's session.
There will be key news flow on Greece through the next few days but the market is braced for the most extreme possibilities.
The Nifty found support on Monday between 8,375 and 8,400.
It eventually saw solid gains. Breadth was positive with advances comfortably outnumbering declines. Volumes were decent.
There was foreign institutional investor (FII) and domestic institutional buying. This move has triggered several positive technical signals.
First, the market has stayed well above the 200-Day Moving Averages (200-DMA) for several sessions. Support above 200-DMA implies the big bull market is still alive.
Second, the index has now registered both higher highs and higher lows, suggesting the intermediate trend is now positive.
The Nifty's latest values of 8,522 easily beat its last peak of 8,421 on June 24.
The put-call ratio (PCR) for July is healthy at 1.5, while the three-month PCR is also bullish at 1.3.
The market seems optimistic. There is resistance at every 50-point interval. But the Nifty could run till 8,800-plus if this is a good move.
Eventually, if the bull market is alive, it should hit new highs. It is early into July settlement.
The Nifty's call chain has peak open interest (OI) at 8,500c but there is ample OI till 9,000c.
The put chain has its OI peak at 8,000p, and ample OI till 7,800p. The Nifty itself closed at 8,522 breaking past the 8,500 mark.
So, the OI on the call chain is likely to re-align upwards. The currency market is also likely to see high volatility.
The dollar-rupee has seen the rupee gaining versus the dollar due to FII buying among other things.
However, the dollar is likely to rise as conservative investors exit Euro assets and head for US Treasuries.
The rupee may also gain against the euro but be prepared for a snapback in the euro as Greece resolves.
The Bank Nifty looks quite bullish.
The financial index can easily swing 350 points plus in a session.
A long July 19,500p (141) and short July 20,000c (48) is tempting.
The potential payoff is 407 for a maximum cost of 93.
The option trader should continue to look at positions quite far from the money.
A near-the-money bullspread of long July 8,600c (96), short 8,700c (58) costs 38, pays a maximum 62. A long 8,700c, short 8,800c (32) costs 26 and pays a potential 74.
The strike at 180 points from money. A near-the-money bearspread of long 8,500p (110), short 8,400p (75) costs 35 and pays 65, at 20 points from money.
A long 8,400p, short 8,300p (51) costs 24 and pays a maximum 76 with the strike at 120 points from money.
If those positions are combined, a long-short strangle set can be created, with long 8,700c, long 8,400p, short 8,800c, short 8,300p.
This would cost 50, and pay 50, with breakevens at 8,350, 8,750. But this position is not symmetrical or zero-delta because the puts are much closer to money.
The aggressive trader could look for even wider spreads, or focus on the BankNifty instead.
If a positive trend is established and continues, bullspreads in the BankNifty will have better reward:risk ratios.
