Midfielder Tim Cahill has admitted Everton's league position puts them in "a lot of trouble" but stressed the team is too good to go down.
Sunday's 2-0 Goodison Park defeat in the 212th Merseyside derby leaves the Toffees just three points above the relegation zone after just one win in their last eight Barclays Premier League matches.
"I think that's the best we've played in a while. Our passing was good, we made lots of space with our movement and had two disallowed goals," said Cahill. "We're in a lot of trouble - the only way we can get out of it is by playing and working our way out of it. We're too good to be in this position."
He added: "We were strong from corners too. It's hard to take but at this stage it's not going to get any easier."
Everton's form has been patchy ever since their opening-day 6-1 defeat at home to Arsenal but their current spell is the worst of the season so far.
Taking into account their Europa League campaign, the Toffees have won only once in 11 matches - a 2-1 victory at West Ham - and have scored just nine goals in that run, which stretches back to October 1.
Cahill said he hoped the squad would take heart and gain confidence from the derby defeat, which came four days after a demoralising 3-2 defeat at fellow strugglers Hull when they were 3-0 down at half-time.
"It's just one of those things and nothing's going to fix it except our mental attitude as individuals and a team," he told the Liverpool Echo. "I'm a lot more positive though - we played better football and had a much better attitude.
"We couldn't hit a barn door at the minute but I'm much happier with our approach. It's the overall attitude and mental toughness that counts."
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