After a ton of anticipation over what type of card the Federal Reserve had up its sleeve, the markets got the answer about 2:20 p.m. Eastern today. As many expected, the central bank approved the so-called “twist” move, which essentially consists of a new $400 billion program that will tilt the Fed’s $2.85 trillion balance sheet more heavily to longer-term securities by selling shorter-term notes and using those funds to purchase longer-dated Treasuries.

If all of this sounds confusing, I understand. However, it really isn’t that complicated. The key thing to note here is that the Fed has told the markets that it wants to put more downward pressure on long-term interest rates over time in an effort to heal a wounded economy, and a bruised housing sector. Part of the Fed’s plan is to reinvest proceeds from maturing mortgage and agency bonds back into the mortgage market, which basically is the Fed acknowledging just how weak the housing market remains.

The Fed members seem to believe that shifting the U.S. central bank’s bond holdings will encourage mortgage refinancing, while also encouraging investors to buy riskier assets such as corporate bonds and stocks. Well, so far, that hasn’t happened, as the initial reaction to the Fed’s twist was met with a rather sharp sell-off.

In fact, the Dow dropped well over 100 points right after the Fed’s announcement, which doesn’t bode well for stocks going forward. The Street could have been looking for more from the Fed, such as a clear signal that some kind of quantitative-easing, part III (QE3) plan was imminent. The central bank refrained from any mention of a plan to buy bonds the way it did with its QE2 plan, which could be one reason for the sell-off.

I think stocks are in a very vulnerable place right now, as the economy continues to struggle. Unemployment remains dangerously high, real estate prices are depressed, and consumer confidence continues falling. When market conditions are the way that they are right now, the best place to be is on the sidelines, and in the safety of a high cash position.

In fact, subscribers to my Successful Investing newsletter have been out of harm’s way since early August, before the market mounted its protracted downturn. If you want to find out how our subscribers used our trend-following methodology to get out of stocks before the sell-off took place, then I invite you to check out my Successful Investing advisory service today.