There is market resistance and it comes at the same time the US is showing some signs of deterioration, so I believe a cautious approach is warranted.

And as the domestic market has failed to respond to strength in the US, and then more recently strength in Asia, one wonders what it will do if the former begins to correct.

By the way, just because I am looking for a correction in the US does not mean the outlook is negative. Corrections are a normal and necessary part of the cycle. They rebalance sentiment, and that is what is needed at the moment.

The longer the market continues to push higher without pausing, the deeper the pullback when it comes.

Let's just review the action over the past couple of months. The US market made a significant low in late November and then again on 19 December. The October low was the major low, as the VIX registered an excessive reading at the time.

But the November and December lows came after the pullback from the 200DMA, and since 19 December, the advance has been most impressive.

The S&P has rallied by 14 per cent since that date, but it has been outpaced by Russia (+23 per cent), Brazil (+22 per cent), Germany (+21 per cent), Japan (+20 per cent), France (+17 per cent), Hong Kong (+17 per cent) and Greece (+16 per cent).

Would a correction really be out of order!

The All Ords has gained just 4.5 per cent since the December lows and the ASX 200 3.8 per cent. It ranks only above Spain and Israel. The three have displayed a similar price pattern over the past few months and all now face their 200DMA.

We are not mixing in very good company. And unfortunately there is little to suggest a turn for the better is imminent.

But what if the Australian dollar (A$) began to weaken? Would that help the Australian market? Or would it just be another sign risk assets were coming under pressure?

Probably the latter. Maybe "this time is different," but I wouldn't bet on it.

The A$ posted a significant low on 19 December. The low coincided with the low (discussed above) in the US equity market. That low was not on major support, but its significance arises from the fact the chart profile of the A$ changed character at that time, moving to a steady uptrend.

That uptrend posted a short-term peak at $1.0844 on 8 February. Momentum indicators have moved into Sell mode, the 10DMA has crossed below the 20DMA, and the price formation over the past month suggests risk is to the downside.

Looking further back, a peak of major significance was registered last July, when the A$ hit 1.108. As noted in the May, the $1.10 level was a Fibonacci 61.8 per cent retracing of the fall from the high in December 1973 to the all-time low in April 2001.

And as that also represented a psychological "round number" resistance, it was always going to be a difficult barrier to overcome.

At this stage, you cannot dismiss the prospect of higher levels over the longer term, but in the short term upside appears muted.

Interestingly, the Australian Trade Weighted index (TWI) hit the resistance of the 2011 highs last week and was promptly rejected, with the index posting a weekly "key reversal". Key reversals have been reliable in the TWI, marking peaks in July 2007, July 2008, April 2010, and May 2011.

This latest key reversal follows on from another one two weeks ago and is accompanied by "negative divergence" on the daily RSI and a Sell signal on the weekly stochastic.

Unfortunately, all those peaks have been associated with peaks in the US market. Will this time be different?

Well, the US market does look risky, and a pullback is likely. Whether or not it will be as deep as the 2010 and 2011 pullbacks remains to be seen, but a pullback now would be preferable to continued gains, which would create a far riskier environment.

Unfortunately, if the US does correct, it would imply lower levels for the Australian market. This would break the gentle uptrend from the October 2011 lows, opening risk to 3900 to 4100.

There are a number of stocks sitting on significant support at the moment. If they break to the downside, the risk of another decline in the broader market increases.