The titular nightmare of this poem seemed to me at first to be the severed head that the subject of the poem saw in his sleep and couldn't forget. But reading on, it feels more like the world itself after waking is the nightmare. His understanding of the world has unraveled in an instant, and suddenly everything is unfamiliar and broken, and other people in this world are separate from him, unable to touch.
In the dark bottom of his head there lay
A severed head.
He saw it when he closed
His eyes to sleep. And when he opened them
It lingered on things like a stain.
He paused
To find a moderate term for what he saw—
Things among themselves at first seemed
Quietly known to one another, and then
For no reason he could understand, flung
Themselves across the singular abyss
In shreds—burned and died to be perceived by him,
Standing a moment on the balcony.
In short, he saw that everything he saw
Was broken.
And then the night formed whole
With all its stars about the man discovering
The brokenness of things.
After a while
He went down to the street, and walked along
An embowered path.
Someone who had been sitting
On a bench since sunset stirred impatiently
As if to rise as he approached him
In the early morning night. But the two
Men turned away from one another. They were
Like swans which avoid touching
Like the species of swans which does not touch.