At the beginning of the school year, 80 first graders, half receiving phonics instruction and half receiving whole word instruction, were asked to spell, read aloud, and recognize 60 regular and exception words. A standardized reading test and phoneme segmentation test were also administered. Those above grade level in reading excelled in phonological recording and application of grapheme-phoneme correspondence rules and were weaker in utilization of visual-orthographic knowledge. Those below grade level applied visual more than phonological coding and benefited from the visual-orthographic knowledge available in a clue word. Results support a continuum of visual and phonological analysis skills in first-grade reading consistent with Frith's (1985) logographic, alphabetic, and orthographic skill levels.