In addition to the comments made by this answerer I would like to add a little helpful (and possibly reassuring) information.
Many parents don't realize there is a lot more to learning to read than just phonics. BEFORE that step can happen kids have to know:
That stories begin at the front of the book and end at the back.
That books have stories in them.
Which way to hold the book.
How to turn pages.
That pictures are symbols that can represent parts of stories
That letters are symbols representing sounds and that collections of letters represent words.
An additional language skill related to reading but not a part of learning to read (more a part of learning to comprehend) is learning how to re-tell stories.
Your son is actually showing you his learning! What he is doing is an early form of emergent reading and emergent Reading skills! YEAH!!!! This is good news.
In other words, encourage him to continue doing exactly what he is doing. In order to also incorporate him watching your example, you might try saying something like, "okay, but then can we take turns?" Listen to him "read" you a story, and then he gets to listen to you read a story. This will encourage the learning he is doing while also modeling "real" reading for him and give the two of you time to engage together on the matter even though he is feeling more independent about it at the moment.