The bull market continued its powerful advance yesterday, driving prices of blue-chip stocks to record levels and sending the Dow Jones industrial average close to the 2700 level.

The Dow gained 22.17 points to close at 2691.49 after briefly moving through the 2700 mark before retreating. The Dow closed above the 2600 mark Monday for the first time after crossing the 2500 mark on July 17.

The market, in one of its most vigorous weeks, gained a total of 88.48 points Monday and Tuesday before losing 11.16 points during a bout of profit taking Wednesday.

Yesterday was the fifth anniversary of the bull market, which began its run with the Dow at 776.92. Since then, the Dow has gained 246 percent.

Market analysts said stock buyers appeared to be plentiful and were reacting to a preponderance of positive news involving improved corporate profits, a firmer note in the bond market and a relatively stable dollar.

Winning stocks ran ahead of losers by more than 4 to 3 on the New York Stock Exchange, where 217 million shares changed hands.

The broader market indicators also moved higher in yesterday's trading.

The NYSE composite index added 1.25 to 186.95. The Nasdaq composite index for the over-the-counter market gained 2.32 to 451.55. At the American Stock Exchange, the market value index closed at 365.01, up 1.11.

Standard & Poor's index of 400 industrials rose 2.06 to 390.59, and S&P's 500-stock composite index was up 2.26 at 334.65.

Monte Gordon, research director of Dreyfus Corp., called yesterday's rally "a reaffirmation of the power and depth of the pools of money pouring into the market."

Buyers were "not afraid of inflation, not afraid of interest rates" and were simply not seeing any negatives, he said.

Indeed, Gordon said, the "greater fool" theory was at work. That theory holds that, at some point, overconfident investors stop caring about what they pay for a stock because they believe there will be a "greater fool" willing to buy it from them at a higher price.

Jeff Applegate, chief investment strategist for E.F. Hutton in New York, said, "This rally, in a word, is about {corporate} earnings. For the first time in several years, we have fairly strong -- even spectacular -- earnings."

The underpinning for the rising corporate profits, said Applegate, is the substantial decline of the dollar and an increasing share for U.S. corporations in the world's profits.

Even so, said Applegate, "This is a joyless rally for those who manage large amounts of money for pension funds. They go home at night, and the market is up, but their portfolios are not."

One of the reasons, Applegate suggested, is that the rally has been so heavily concentrated in the Dow and in the blue-chip stocks, the ones most often bought by foreign investors.

"This is not a broad-based market," he added.

One of those institutional investors not enjoying the upward spiral of stock prices was Richard H. Fontaine, portfolio manager of the T. Rowe Price Capital Appreciation Fund in Baltimore.

For the past nine months, as the market has been rising, Fontaine has been pessimistic about the market and has been holding 40 percent of his assets in cash, he said.

"I've been trying to run against the tide and getting crushed," he said.

Stock prices, he said, "have gone to ridiculously high levels" as the market "has taken on a momentum of its own."

Fontaine said he thought the action was attracting many new players who were jumping into the stocks that had been winners in the past