The Royals found themselves three goals down by the break and failed to mount a comeback in the second period as Arsene Wenger's side dominated.
And, though the 51-year-old praised Arsenal's midfield trio of Mikel Arteta, Santi Cazorla and Jack Wilshere, he insisted the hosts could have done more to dampen their influence.
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"We could have got tighter in the first half. Their three midfield players were excellent, but the second half response was good from our point of view."
The Slough-born boss went on to insist Reading's season is not yet a lost cause, pointing to the January transfer window as an opportunity to turn things around.
"That game won't shape our season. We've got a lot of home games to come which will be defining for us," he continued.
"We have to do better than we've done. We play Manchester City away, then we've got Swansea and West Ham at home, which we're looking forward to.
"But we can't look too far ahead, we've just got to keep going. We're doing everything in our power to make sure we're in this league next season.
"It's a strong possibility that we can get players in and we'll try to do that.
"We'll see what January brings. We all know it's a tough window but we've been planning for some time now and that's what we'll be looking to try and do."