This paper describes a new, effective method developed at the National Research Council Canada for rolling element bearing incipient failure detection. This method can detect not only outer race damage, previously published, but also inner race damage with a 100% detection rate based on a sample size of 32. The prediction of the exact angular location of the damage spot along the raceway is illustrated and experimental confirmation is presented. For the first time, a statically measurable parameter for inner and outer race damage is introduced as a means of verifying other techniques which do not offer absolute proof, but resort only to "overwhelming evidence". A brief comparison with other methods such as Shock Pulse Method, Kurtosis Analysis and High Frequency Resonance Technique is presented. A computerized automatic monitoring system utilizing the new method is described and experimental results are presented.presented.