The match against Madrid isn't one I think Madrid did take serious nd shouldn't be considered like one which AC Milan was actually superior to Madrid is and talking about Madrid's strong and firm squad, they weren't all present in that game, he only used a few of them and not the actual complete squad which he has selected to play this season (I mean his first 11). With Manchester city I believe similar thing did happened too because in that game Manchester city was seen with minimal dominance and that was really unlike them, the preseason games aren't one that should be taken seriously as the main strength of the trans will be seen when the season begins.
Real Madrid lost their two pre-season games against Barcelona and AC Milan. But that doesn't mean that Madrid's dominance has collapsed and they are in bad form. Real Madrid already have a solid squad so I don't think they need to prove anything in pre-season games. Even Real Madrid only played their bench players or their young players in pre-season games. We will be able to see how strong Real Madrid really are in the UEFA Super Cup against Atalanta. I favor Real Madrid to win that game.