Commodity Trends Strategy Fund

DXCTX CUSIP: 254939457
DXCTX Inception Date: 6/4/2008
DXSCX CUSIP: 254939341
DXSCX Inception Date: 3/1/2010

The Direxion Commodity Trends Strategy Fund seeks daily investment results, before fees and expenses, of the performance of the Commodity Trends Indicator ("CTI®").

Commodity Trends Indicator (CTI®) is an investible long / short strategy that offers exposure to 16 commodity markets (in six sectors) and will hold them long or short, based on a price momentum formula. The long/short decision involves monitoring the price of the sectors in relation to their respective seven-month moving average price. The exception within the model is the Energy sector which, due to geopolitical issues, economic changes and other factors uniquely related to the sector, is positioned either long or neutral (flat).

February 2010

Provided by: Victor Sperandeo of Alpha Financial Technologies

Energy – The CTI® was long the Energy sector for the month of January. After a week of higher prices, China tightening credit by cutting bank lending and concerns about possible new CFTC position limits led to fundamental selling and fund liquidations. Meanwhile Crude Oil's inability to break above the $85 barrier led to additional technical selling. A stronger U.S. Dollar added to the drop in prices, as Crude and its products sold off for nearly two weeks straight, finishing near the December lows. Despite colder temperatures, Natural Gas also finished January lower, although to a lesser extent. We believe Chinese economic policy, stockpile levels, any further developments with Iran, the direction of equities and the U.S. Dollar, and any surprises in economic data are the most important factors in the market. The Energy sector is now flat for February.

Grains – The CTI® was long the Grains sector for January. After a week of quiet trading, crop reports which showed ample supplies and acreage planting pushed prices of the entire sector sharply lower. Export demand was also diminished due to the strength of the U.S. Dollar. Wheat, Corn, and Soybeans all reached prices not seen since October, and ended January at or near their lows. We believe the sector will remain sensitive to any acreage or planting news, as well as weather, the direction of the U.S. Dollar and oil, economic growth, any dramatic move in equity prices, and global demand. The sector is now short for February.

Industrial Metals – The CTI® was long Copper for January. Copper followed a pattern very similar to Crude Oil for the month. Despite being slightly higher more than halfway through January, the weaker equity markets, commodity selling in general, and questions about the strength of Chinese demand led to large fund selling. Copper closed January near its lows for the month, below the lows for December. We believe global economic growth (or a lack of it), Chinese economic policy (and thereby demand), and the state of the U.S. housing market remain the major factors in this market. The sector is now short for February.

Livestock – The CTI® was long Livestock for January. Trading in the Livestock sector was subdued throughout the month, especially in comparison to other commodities. Lean Hogs finished January slightly lower, while Live Cattle was in a very tight range and ended marginally higher. Lower feed costs have helped increase demand a bit. Excessive fund buying or selling, weather patterns, export demand, and global economic growth will be the main influences on the sector. The sector remains long for February.

Precious Metals – The CTI® was long the Precious Metals sector for January. Both Gold and Silver were lower for the month, but Silver trading was much more volatile. Silver rallied more than 10% during the first half of January, before the stronger U.S. Dollar and plummeting equity markets drove it down nearly 20% from those levels, to the lows of November. By comparison, Gold was rather quiet, following the same pattern but finishing right around the lows for December. We believe perceived economic strength, a stronger U.S. Dollar, any global instability, and any changes in interest rates are the major factors influencing the Precious Metals markets. The sector is now short for February.

Softs – Soft action was volatile for January. Sugar was stronger throughout the month, as strong demand combined with a lack of hedging by large end-users to push prices to twice the levels at the beginning of 2009. Coffee followed the same pattern as equities and many other commodities, facing large-scale selling during the latter half of the month and finishing near the November lows. Cocoa's pattern was similar, but stronger demand helped limit the losses by comparison. Cotton sold off steadily throughout the month, due to a combination of weak exports and a stronger U.S. Dollar. In summary, we are now long Sugar and Cocoa but short Cotton and Coffee for February.