It has air trapped. Your not getting a good bleed. Make sure you use fresh dot 5.1 not an old opened one.
Bring the reach out and if you have pad contact turn that all the way opposite the arrow. It helps to have the lever up much higher then the caliper. Also tapping on the caliper and hose while drawing a vacuum helps break air bubbles free. Rotate the master cylinder up and down 180 degrees while drawing a vacuum to help dislodge air bubbles. Removing the grip is helpful when you clamp down the lever during the caliper/hose bleed portion.
Check your work by hanging or standing the bike with the levers inverted and squeezing them. Trapper air will usually run to the lever body rather quickly.
The silver nut doesn't seem to have any threads at the other end. Did you try turning this during your bleed? It's possible you may have damaged the seal. Looks like it was designed to twist to prevent the main hose from loosening. Tech doc says it's not serviceable and requires a new lever assembly.
If it's not leaking, I would try a bleed again following the avid bleed tutorial.
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