Calle Fuencarral is where the cool is in Madrid. All the "in" shops are there, from global brands like Levi's to national or local ones, you'll find stuff cool enough to impress your mates over here. Once on Calle Fuencarral, go to Mercado Fuencarral, a gathering of shops of all kinds. The area is called Chueca and it's the gay quarter.
I recommend walking up Fuencarral towards Malasaña and walk the pueblo-like narrow streets finding your way to Plaza Dos de Mayo, then choose a bar or cafe and you might be lucky enough to see director Alejandro Amenábar, who lives in the area.
Metro Gran Vía or Noviciado