One clue given in chapter 8 is Watson’s mention of Mrs. Barrymore. He describes her as unemotional, yet he found her crying and it made him suspicious. What was going on? Watson point this out to Holmes in the same letter he mentioned the convict, but he never connected the two.
I heard her sobbing bitterly, and since then I have more than once observed traces of tears upon her face. Some deep sorrow gnaws ever at her heart. (ch 8, p. 56)
Watson is suspicious, and he tells us of this clue, but he does not know why Mrs. Barrymore is crying. He just knows it is curious.
In chapter 9, Watson mentions an interesting event. He saw Mr. Barrymore staring out a window, so he went to look later. He realized you could see the more clearly from that window, although there was really nothing out there.
The western window through which he had stared so intently has, I noticed, one peculiarity above all other windows in the house—it commands the nearest outlook on to the moor. (ch 9, p. 58)
This is an example of Watson almost connecting the dots. He notes Mrs. Barrymore’s suspicious behavior, the candle appearing at night, and the convict. He just does not connect these and realize that Mrs. Barrymore is communicating with her convict brother.
Watson is a detective in his own right for this book, but he lacks Holmes’s skills in deduction. Watson’s job is to watch for clues and communicate them. He has no idea that Holmes is there too, following different leads. He does his best, but the role of investigator is one he finds both invigorating and distressing. He is thrilled to see Holmes when he returns (until he finds out he has been there the whole time), so that he can pass on the reigns of the investigation.