If you laid all the styptic pencils in America end to end, you still couldn't staunch the flow of blood in "A Nightmare on Elm Street." Wes Craven's latest slasher movie is a sort of "Splatdance," in which your dreams don't only come true -- they also kill you.

Craven, who also wrote the screenplay, has a remarkable feel for the habits and humor of teen-agers; the sharp eye and ear with which he sketches his protagonists' early scenes, as they trick their parents into allowing them to slumber-party together, grounds the horror in everyday life. Nancy (Heather Langenkamp), her best friend Tina (Amanda Wyss) and Tina's boyfriend Rod (Nick Corri) have all had the same nightmare of being pursued by a dark, spectral figure -- the fourth teen-ager, Nancy's boyfriend Glen (Johnny Depp), has the good fortune not to dream much. Lights out, and the nightmare returns -- only this time, it's for real. Four razor gouges slash spontaneously across a girl's tummy, and she's slammed against the ceiling, from which gouts of blood rain like confetti.

For such a low-budget movie, "Nightmare on Elm Street" is extraordinarily polished. The script is consistently witty, the camera work (by cinematographer Jacques Haitkin) crisp and expressive. Haitkin has bathed the movie in a perversely refreshing baby blue; the camera's movement in the action sequences confidently evokes the geometry of the surrounding space (usually, a dark and steamy boiler room) -- you always feel you know where you are vis-a -vis the monster, so when he pops up out of nowhere, it's that much more shocking.

This genre has built-in limitations -- the immediate reaction is to say you've seen it all before last Friday the 13th, so there's a constant pressure on the director's inventiveness. But Craven faces the challenge admirably; "A Nightmare on Elm Street" is halfway between an exploitation flick and classic surrealism. Outfitted in a soiled, rugby-striped jersey and battered slouch hat (for these suburbanites, terror is a homeless man), his weirdly elongated arm ending in a glove rigged with steel claws, Craven's slasher is the most chilling figure in the genre since "The Shape" made his debut in "Halloween." He announces himself by dragging his claws on steel pipes or across concrete walls (fingernails-on-chalkboard, writ large); and he has an emphatic way of making his point -- slicing off his own fingers, or raking his claws against his own chest, he preempts your own revenge.

In the credits, Craven offers thanks to Sam Raimi, the wunderkind director of "The Evil Dead," and "Nightmare on Elm Street" shares Raimi's love of fluids -- the slasher bleeds a yellow substance halfway between mustard and mucus, and when a victim is dragged into a vortex that appears in his own bed, the hole explodes in a geyser of gore. Worms and centipedes and lascivious tongues lurk beneath the surface of "A Nightmare on Elm Street," as if there were some vast epidemic of the DTs.

And "Nightmare on Elm Street" is buoyed by the slick performances of its kids. Wyss is a teen-age Hitchcock blond, a Little League Janet Leigh; Corri's low-class lewdness is fine, and Depp brings a charming puckishness to his wisenheimer role. Langenkamp's healthy chunkiness provides a nice counterpoint to a character at the end of her tether. Only the adults are crummy -- Ronee Blakely, as Nancy's mother, who seems like a refugee from a drawing-room melodrama, and John Saxon, who, as Nancy's father, makes every scene he's in play like a TV movie.

At times, Craven threatens to gum up the works with hackneyed hobbyhorses -- the Grand Gooey-nol is rooted in parental ineptitude (the movie's worst scenes involve Nancy and her alcoholic mother). Then there's something here about the loss of innocence, but the theme comes in a scattershot way -- Craven doesn't always seem to know how good his story is. But "Nightmare on Elm Street" is more than a gross-out picture. The plot itself cleverly mirrors the experience of the genre (what are horror movies, after all, but organized nightmares?). And Craven doggedly maintains the movie's irrational, nightmare pitch -- every "explanation" offered by the characters is subsequently dashed, every victory over the monster decisively reversed.

Sweet dreams. A Nightmare on Elm Street, at area theaters, is rated R for graphic violence, profanity and sexual situations.