When using SOAP the observation step is the exegesis which is a critical look at a text. Exegesis comes from the Greek word for interpret and it's often used in connection with the Bible. Often times, religious rules are based on an exegesis of a text.  In short what did the scripture mean to the people in ancient times.  

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Hermeneutics is important for spiritual development because the correct application of biblical truth depends on correct interpretation. It is relevant in determining what the Christian believes and how the Christian lives.  When doing the application step of S.O.A.P. we are talking about today's application of the text.

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Summary

The distinction between exegesis and hermeneutics is a thin line. ... Hermeneutics is therefore the field of study which is concerned with how we interpret the Bible, whereas exegesis is the actual interpretation of the Bible by drawing the meaning out of the Biblical text.