I am trying to understand this rotary encoder I have, but it makes no sense to me.

I am using this rotary encoder: https://www.amazon.com/gp/product/B07DM2YMT4/

CYT1100 aka CY110 aka EC11

I am using this wiring: https://i.sstatic.net/aMyR5.png

P2 is the "push button" and it gives continuity when pressed.

I am using a knock off arduino nano and this is my simple script:

#define PIN_CLK 2

void setup() 
{
    Serial.begin(9600);
    pinMode(PIN_CLK, INPUT);
}

void loop() 
{
    auto val = digitalRead(PIN_CLK);

    Serial.println("CLK:" + String(val));
}

Where PIN_CLK is connected to A (DW) or B (CLK) in the diagram.

My expectation is that A and B should be either a constant HIGH or LOW depending on where the brushes are internally. Not switching to HIGH or LOW for a moment and then returning to what it was before.

When I check them with my multimeter, they are both always 5v (when its not making loose contact on the breadboard).

The serial plotter says its switching between HIGH and LOW repeated:

https://i.sstatic.net/6VC3z.png

Same with the Serial monitor:

https://i.sstatic.net/wAk0v.png

When I spin the encoder, it gives me gaps of LOW in the output like this:

https://i.sstatic.net/lOUmx.png

If I hold my index and thumb against P1 (5v) and A (CLK) while spinning the encoder. I get constant stream of HIGH with a LOW on every notch spin:

https://i.sstatic.net/CzUwV.png

Can someone explain this behavior and how this encoder is suppose to work?

Edit: I tried this schematic:

https://i.sstatic.net/Mlj1l.png

Whenever I turn the encoder. The LED blinks for a few milliseconds. Then turns off.

Is it suppose to stay solid depending on the 2 bit states?