The Saddlers were dealt a 1-0 loss by Northampton Town at the Banks's Stadium, continuing their rotten run in 2022.
Taylor's side are now 21st in the table and just seven points clear of second-bottom Oldham Athletic, who boast a game in hand.
But the under-pressure Walsall chief said: "I don't think we're in a relegation battle.
"What we are is in a really bad vein of form.
"We're in a bad vein of form based on the talent we have in the squad.
"We're not in a position that the players deserve to be based on their ability.
"We're in the position we're in at the moment because we haven't performed consistently enough.
"Now, we can't be mentally weak. It's my job to protect the players, but there also has to be an element of truth in it.
"The performance was better, but we’ve still not got a result, so it’s got to be better again on Tuesday (at rock-bottom Scunthorpe United) and we’ve got to get a result."
The Saddlers' latest dismal display saw Louis Appere net in the 10th minute for the Cobblers, with the hosts then lacking the guile or vigour to find a leveller.
The defeat places even more emphasis on Tuesday night's trip to Scunthorpe, which is very much a must-win clash and could be described as a relegation six-pointer.
"We've given a free-kick away and then not cut the ball out at the near post," said Taylor.
"The thing for me at the moment is that we're not making teams work anywhere near hard enough for goals.
"That's what is really disappointing. It's our errors that are costing us.
"When you look back at that goal, it's most definitely avoidable. It's not good enough.
"We didn't hold the ball up. We weren't enough of a physical threat up front, but we've still had good chances."
One positive on another awful afternoon was the performance of Liam Kinsella, who donned the armband with Joss Labadie dropped to the bench.
And Taylor has urged other members of the squad to follow the wholehearted Kinsella's lead.
"I thought Liam Kinsella was outstanding," added Taylor.
"He was outstanding because of nothing other than his effort, desire and determination to lead the football club.
"It was an outstanding performance, and we need more of that from other members of the squad.
"I just love his endeavour. He gives you absolutely everything he's got. That's what we need now."