In response to the OP, ihearttc,your DS sounds like he's at exactly the right level for this stage in Reception.
Since all the fuss about synthetic phonics the 'searchlights model of reading' seems to have been bypassed, but I think it still has some useful ideas. It basically held that children use a set of strategies to read, phonics being just one of them. The focus on phonics now is (I think) because it was felt that phonics was the most effective way of bringing all children's reading levels on.
The searchlights model
A ?Word Recognition Searchlight? ? for words that are recognised by sight (e.g. my, sea, tree) (this sounds like the bit your son is strongest at).
A ?Phonics Searchlight? - for hypotheses/guesses at the possible sounds for: the one-, two-, three- and four-letter spelling choices of written English (e.g. for the ?g?, ?ge?, ?dge? and ?eigh? in giant, cage, bridge and eight, respectively); other sequences of letters, such as consonant blends (e.g. the two sounds at the start of bridge, brick and brown); and syllables (e.g. village, cabbage, cottage).
A ?Context Searchlight? - for hypotheses/guesses based on the words, phrases, sentences and stories acquired from essential speaking and listening activities ? including the ?pretend reading? of sentences, paragraphs and pages in favourite books (e.g. On Monday, Tuesday, Wednesday, Thursday and??.., he got up at six o?clock.).
A ?Grammar Searchlight? ? for hypotheses/guesses, which may be implicit or explicit, about how words combine in a well-formed sentence (e.g. ?he six o?clock got up at?, if used above, would be ?ungrammatical?).
Presuming by blue you mean that your DS's school book bands, then he is at a level 1c/b. If you look at the learning opportunities you will see that it describes much more than phonetic decoding.
Band 4 ? Blue ? Level 1 (C/B)
Learning opportunities
- Move through text attending to meaning, print and sentence structure flexibly
- Self-correct more rapidly on-the-run
- Re-read to enhance phrasing and clarify precise meaning
- Solve new words using print information along with attention to meaning
- Use analogy with known vocabulary to solve new words
- Manage a greater variety of text genre
- Discuss content of the text in a manner which indicates precise understanding
Finally, you might also find that digraphs etc are covered in class by the end of the year and at the beginning of Year 1.
I hope this information-heavy response was useful!