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So far no Jihad (Iran is about 10 hours ahead of us) but the Iranians, desperate to do something to appease the war hungry population, attacked a Romanian oil rig in the gulf.

This dropped the European markets off a cliff and came just after Asia closed well up for the day but the platform has been the subject of a long standing contract dispute and this seems to me like a bully kicking the smallest kid in the yard in an attempt to save face.

The Hang Seng and Nikkei more than rebounded (WSJ: sub. req.) as Asian Sunnis ended the day without trouble (the advantage of being in the land of the rising sun). Non-muslim markets were up 1% while Pakistan, who do not feel they are out of the woods yet, sold off 2.5%. Talks have moved far enough ahead that we now have a new acronym, the AEC, for the Asian Economic Community with a goal of uniting 10 nations economically by 2015.

The tightening of Chinese monetary policy coupled with a Fed pause is sending the dollar way down against the Yuan and also the Euro. If we start losing ground against the Yen, we could be dropping another 5% before you know it. Don't forget that the dollar is just another failing commodity that was boosted by terror fears!

European markets were on a roll before the attack and are getting it back together (7:30 am) now that the shock has worn off. Finally we can watch Europe for a lead on US equities but I think that attack just took the wind out of their sails - too bad as they were up close to a point before it happened.

Our futures went from positive to negative at the same time but perhaps cooler heads will prevail by 9:30 but I expect another lackluster day as we wait for Iran's response, presumably before their midnight (our 9 am). Let's keep an eye on the same levels we were watching yesterday but I'm not sure there will be anything definate either way and it will be a great disappointment to oil and gold bulls as it does not seem to have occurred to anyone that Iran may engage in diplomacy.

Oil should hit some overhead resistance around $74 and, if it does today, I will be taking up various put positions we've discussed. It looks like my months of hammering on the great oil scam are finally paying off as I am no longer the lone voice calling for lower oil prices:

Gold will be a similar story if things aren't so terrible in the Middle East. Let's watch the $640 level there but a drop in either oil or gold will indicate that both are likely to go down.

Not at all a good day to play the markets, see comments today for possible day positions and oil puts (hopefully) but mostly cash is still the way to go.

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As expected, Toll Brothers' (NYSE:TOL) earnings were off, but they were off 19% from the greatest builder year in history! Of course, the stock is flying up and the whole sector should get a lift as it looks like the worst case scenario is just not playing out.

I still like HOV ($30 for .25), DHI ($22.50s for .70), PHM ($30 for $1) and NCS ($50s for $1.45) but only if TOL stays positive (which it should).

Nothing else looks very safe at the moment so we watch and wait but, if we get good news from Iran, it could very quickly be game on in which case we will grab the picks from the update that have pulled back for the next leg up.

Source: Options Trader: Tuesday Morning Ideas