I'm not a flight instructor, but my opinion is that a good instructor should give you room to make mistakes, up to the point where it becomes unsafe. At that point, the instructor should take over and take decisive action to avoid problems.
So if you or the instructor spots traffic miles away, takes over the controls and then just lets the plane continue on its present path, he was too early and probably too edgy, in my humble opinion. Instead, he should just let you deal with it, or give you verbal instructions for dealing with it. Did you talk to him or the CFI about this?
Obvious exception is in the very early stages of training, where the instructor should take over for take-offs, landings and other things that are simply beyond what the student can handle at that point. Or to demonstrate something which is very hard to explain verbally.