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).

August 2010

Provided by: Victor Sperandeo of Alpha Financial Technologies

Energy – The CTI© was flat the Energy sector for the month of July. The entire sector finished the month nearly unchanged. Slowing economic growth, both domestically and globally, as well as ample stockpiles, kept a lid on prices; however, the recovery in equity prices lent some strength. We believe economic growth, global demand, stockpile levels, any further developments with North Korea or Iran, and any surprises in economic data are the most important factors in the market. The Energy sector remains flat for August.

Grains – The CTI© was short the Grains sector for July. Wheat saw a dramatic rally due to low stockpiles and reduced global output as a result of heavy Canadian rains which damaged their crop and a heat wave in Russia. Corn and Soybeans also rallied for the month, but not nearly as much. We believe the sector will remain sensitive to any additional acreage or planting news, as well as weather, any military conflict, export levels, and global GDP. The sector is now long for August.

Industrial Metals – The CTI© was short Copper for July. Copper traded quietly for the first half of the month, as some questions about Chinese demand kept funds from jumping in. However, as equities continued to rally and the U.S. Dollar sold off, prices began to rally, finishing July about 10% higher. We believe global economic growth, any news on Chinese demand, and the state of the U.S. housing market remain the major factors in this market. The sector is now long for August.

Livestock – The CTI© was short Livestock for July. Cattle prices finally saw a strong month, with increased demand, seasonal sales, and sizeable fund buying. Hogs were slightly higher, but traded in both directions. We believe feed prices, export demand, and global economic growth will be the main influences on the sector. The sector is now long for August.

Precious Metals – The CTI© was long the Precious Metals sector for July. Both Gold and Silver saw a good deal of fund liquidation during the month, with Gold the weaker of the two. The fears of European monetary problems have diminished, and this - along with stronger equity prices - have eliminated some of the safe-haven Gold investments. In addition, the increase in Gold Lease Rates during July placed added pressure on the Gold market. We believe potential conflict in Korea or Iran, and any changes in interest rates are the major factors influencing the Precious Metals markets. The sector is now short for August.

Softs – Soft trading was volatile in July. Sugar was sharply higher, as limited supply kept funds and end-users buying. Some wholesale buyers had not hedged their Sugar needs, and are now being forced to pay up. Coffee saw very strong fund buying, as very low stockpile levels in Columbia more than offset the generally adequate crop this year. Cocoa received a good deal of press because of a major speculator who bought a good deal of Cocoa, but after extremely volatile price swings, it finished July almost unchanged. Cotton saw two-sided action, with fund liquidation during the first half of the month, followed by some buying on the weaker U. S. Dollar during the second half. In summary, we are now long Coffee, Sugar,  and Cocoa but short Cotton for August.