But the Argentine striker redeemed himself on Saturday (Sunday AEST) when he scored two goals to fuel a 5-2 rout of Atletico's fiercest rivals in a La Liga derby.
Alvarez stole the show from Kylian Mbappe, who scored as Madrid built a 2-1 lead.
He converted a penalty to put Atletico ahead 3-2 early in the second half before he added a second goal with a curling free kick.
Diego Simeone's Atletico ended up dealing Xabi Alonso his first loss of the season after Madrid had won all six La Liga games and their Champions League opener.
Alonso's only other loss since taking over as Madrid's coach in the summer was against Paris Saint-Germain in the Club World Cup semi-finals in July.
Barcelona can overtake leaders Madrid with a win at Real Sociedad on Sunday, while Atletico moved into fourth place on six points.
"We knew how special today was, it was a derby and we needed to take the three points to reduce the difference with those at the top," Alvarez said.
"We had control of the game and the team never stopped going forward. We created lots of scoring chances and were able to convert them."
Simeone appeared to wipe tears from his eyes after Alvarez's second goal.
"I have many emotions. This season started with difficulties, but thanks to the efforts of so many people we are now doing a marvellous job," said the emotional manager.
Atletico had endured their worst start to La Liga since Simeone became coach over a decade ago and needed this win to stay in the title fight.
6°C