and the Q with a line over it (in fact each of those are overlined)
The problem you are making for your self is that you are not looking for an edge you are looking at the level. To see an edge you have to remember what the level was like last time you read it (use a variable) then only when last time was a zero and this time is a one you have a step.
The step output is simply one of the encoder's outputs and will change directly with it.
On the rising edge of this signal the state of the other output from the encoder is latched or remembered. This will be always the same for the same direction of rotation.
but if my encoder's outputs only switch from low to high on every other physical rotation step, how can it tell when there has been a step in between?