The champions slumped to a second consecutive away Liga defeat, with Fausto Rossi pouncing on a ricochet to net the game's only goal 17 minutes in.
Lionel Messi saw a host of chances saved by Valladolid keeper Diego Marino, while Neymar missed a great opportunity in the second half as Barca were consigned to their fourth league loss of the season.
The result leaves the Catalans one point behind leaders Real Madrid at the top of the table, with Carlo Ancelotti's men hosting Levante on Sunday, but Martino is refusing to write off his team's chances of retaining their crown.
"Whilst we still have a chance mathematically, we will keep fighting for the title," the Argentinian said.
"We struggled with our mobility, especially in the final 20 metres of the pitch. We couldn’t find the space. We had a lot of the ball, but lacked any depth.
"It is clear from today that we are not at our best. And we need to be at our best against Real Madrid."
Midfielder Xavi was under no illusions about how poor the result and performance were, admitting that he could see no plus points.
He told Carrusel Deportivo: "We can't draw any positive conclusions from that result and performance.
"We have to try and improve ahead of Wednesday (against Manchester City in the UEFA Champions League).
"It just wasn’t to be today. It's a very painful loss - definitely a step back for us."
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