The left side of the diode (the side without the silver band) goes to the yellow wire. As I understand it, there is a 4-wire color-code cable that connects to 4 screw-terminals on the controller as shown in a previous photo. The other end of this 4-wire cable comes from the guts of the turnout electronics itself. If I understand your question, the answer is you can connect the diode to either end of the cable but I'm not sure how accessible the yellow wire is underneath the turnout. I'd think the yellow wire is easier to access at the controller but I understand how that might be physically located for the convenience of the operator and no where near your signal light.
If you have a voltmeter, measure the DC voltage at the yellow wire. The + meter lead (typically red probe) goes to the yellow wire. The - meter lead (typically black probe) goes to DC-. From what others report this voltage should be either +5V or -5V depending on the turnout position. I suggest you make this measurement in two steps. Confirm you have that connection between AC common and DC-.
First, make the measurement without the diode connected to the yellow wire. You want to see the yellow wire voltage alternate between +5 and -5 depending on turnout position.
Then, connect the diode to the yellow wire and confirm the voltage still alternates between +5V and -5V depending on turnout position.
I measured the AC voltage at the turnout where the yellow, red, green and black wires go in and the AC voltage I got was .86. I do get 5V in DC. I do get a negative voltage when I switch the turnout.
So I tried wiring the circuit again and it WORKS! Thanks for your help! I think I may have had the polarity reversed somewhere, perhaps the power supply .