It seems that it's over potted and therefore the soil is waterlogged. A plant that's only 7 inches high shouldn't be in such a large pot. They like full sun, but because it had been inside, it needs a little protection from full sun when you take it outside. Maybe you can repot it to a smaller pot and place where it only gets early morning sun and then shade from a tree. Slowly you can let it get more sun, but not until it recovers. Unfortunately, if most of the leaves look the way you say, it may not recover. Good luck with it.

{{gwi:5901}}

So even if i do the finger test, it can still be water logged? The Shade is in the Morning, and the sun is in the afternoon. I water it until the water flows out of the bottom holes. I then let it sit for about 30 mins or so, then drain off the the excess water that collects in the drip pan.

to add, how big of a pot should i be using?

Aloe are from dryer areas normally, so when the pot is too big, the roots are only filling a portion of the pot. The rest of the soil gets compacted and tends to stay too wet. Take the plant out of the pot and gently shake off any loose soil from the roots. Take a look at the size of the root mass (root ball as it's called). Choose a pot that will fit the roots with maybe an inch extra all around to give a little growing room. I'd also suggest getting cactus potting soil and mixing it half and half with regular potting soil. When you repot the plant, don't set it too deep in the pot. The soil level should be where the roots join the plant. Don't water for two days and keep it out of the direct sun. Then water it and slowly expose it to morning sun a little at a time. Then you can move it to get more and more sun. But I don't think you should ever have it where it gets all full sun all day, especially the hottest sun in the middle of the afternoon, since it's a pot plant and not growing in the ground the way they're grown in warm climates. It should be allowed to dry out between waterings, and if you're not sure if it needs water, with these desert type plants you're better off not to water and test again the next day. Underwatering generally will do little damage to a plant (unless it really is dried out for weeks or something!) but overwatering will kill most plants' roots, and that's something they usually don't survive.
Good luck with it.

{{gwi:5901}}

I bought catcus soil for it. I just checked the plant (1230pm) and the sun is just starting to cover it. I was in shade all morning before that time. Looks like i am going to get a new pot. I am thinking of going with a 6 inch round pot. Does it matter how deep the pot is? The current one is about 12 inches tall as well.