Thus, the output of the “set/reset” circuit (DIR, U2, pin 6) indicates the direction that the rotary encoder is turned. As mentioned previously, each pulse is delayed by the low-pass filter R1 ...

I needed a rotary ... debouncing an encoder. When A is changing, B is stable and vice versa. Since it is a gray code, that makes sense, but it is the insight that makes a simple decoder possible.