"J" channel is all that's required there, the water seal is provided (hopefully) by the window 's flashing below the siding:

http://www.rd.com/images/tfhimport/2...e005img002.jpg

See for example pp 19 here:

http://www.vinylsiding.org/publicati...al_english.pdf

The kickout is a potential trouble spot, I'd be concerned about its construction - for starters, that caulk is not going to form a permanent seal - and about the detailing you can't see behind the siding at the roof/wall junction, unless that's done properly you are just funneling water into the wall. If accessible I would check the wall behind and below that junction with a Tramex or similar meter.

If you are registered there, check out this thread on the NACHI board:

kickouts - NACHI Message Board