There are two reasons why the needles aren't catching the yarn on my CSM:
First, I changed directions with the needles still engaged (bad!). I now understand that I have to lift needles up so I can allow gravity to move the direction of the uplift cams to allow a change of directions of the needles.
So that explains why the needles weren't being lifted. But the yarn carrier was not lined up with where the needle action was occurring.
Second, I had the tension cam adjustment screw located incorrectly. Here's from the manual. Look at the stops (the metal just above the arrow that is pointing to the bottom gear (A). The tension cam adjustment screw is located on the flat side.This is how my machine was set up:
So it was on the wrong side. Here's how I corrected it:
See how the yarn carrier (not installed, but the screw is shown) and the tension cam adjustment screw is now located in between the stops.
Keep your fingers crossed.