Unlike the last white haired Godlike to tangle with Lady, Mewtwo has common sense. Attempting to mind control Lady was worthless- even if he could get her to murder Killer, it'd just make her madder. And even gaining that level of control was iffy at best, as Lady's mind was completely alien, even by DL standards.
Mewtwo's plan was simple in the extreme. Hiding and jumping lady with a single super buffed Psychic was good. It was a smart move. It did him no good, as Lost Progress instantly dispelled Amnesia. His unprepped Psychic was powerful, strong enough to fell many a Godlike in one blow. The living incarnation of Malice just shook from the blow. Lady was still on her feet, and judging by the raw energy she was gathering, her counter attack was going to be overkill.
Mewtwo's frantic attempts to float out of the way worked. Sort of. The blow merely grazed Mewtwo and sent him flying out of the arena, instead of turning him into paste. A hallow victory to be sure, but better than getting completely wiped out by a single attack.
