Commodity Trends Strategy Fund

CUSIP: 254939457
Inception Date: 6/4/2008

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).

January 2010

Provided by: Victor Sperandeo of Alpha Financial Technologies

Energy – The Fund was long the Energy sector for the month of December. Crude Oil and its products traded lower during the first half of the month, then reversed and recovered those losses during the second half. The stronger U.S. Dollar put some pressure on prices, while drawdowns in supplies and the hope of economic recovery spurred some buying. Natural Gas was stronger through almost the entire month, due in large part to the cold weather felt over much of the nation. Some profit taking was seen late in December. We believe stockpile levels, unexpected weather, any further developments with Iran (both regarding their nuclear program and the recent political violence), and any surprises in economic data are the most important factors in the market. The Energy sector remains long for January.

Grains – The Fund was long the Grains sector for December. Corn and Soybeans followed the same pattern as Crude Oil, with early weakness in December and strength in the latter part of the month. Wheat was the weakest of the group, as supplies seem ample and the current global crop is doing well. We believe the markets are heavily influenced by the seasonal patterns now occurring. Also, 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, and global demand. The sector remains long for January.

Industrial Metals – The Fund was long Copper for December. Copper followed a similar pattern to Crude Oil, although the selling pressure was less dramatic, and the buying drove contracts to new highs. London warehouse levels continue to decline, suggesting strong global demand. We believe global economic growth (or a lack of it), any mining issues, Chinese demand or stockpiling, and any firming in the U.S. housing market remain the major factors in this market. The sector remains long for January.

Livestock – The Fund was long Livestock for December. Hogs traded in a rather quiet pattern, holding onto recent gains but not seeing and additional upward movement. Cattle was sharply lower early in December, following the other major commodities, but by the end of December had recovered all those losses. We believe seasonal supply issues remain the major factors facing the markets, as well as export news, feed costs, and economic growth. The sector remains long for January.

Precious Metals – The Fund was long the Precious Metals sector for December. After following Crude Oil lower early in the month, the bounce in the U.S. dollar kept pressure on prices through the rest of the month as well. Gold showed a bit more strength than Silver. We believe an increase in tensions in Iran, the direction of the U.S. Dollar, any changes in interest rates, anything material adding to the world debt, and the level of economic recovery are the major factors influencing the Precious Metals markets. The sector remains long for January.

Softs – Soft action was volatile for December. Sugar was stronger through the month, as global demand remains strong and many purchasers had failed to hedge their needs (we were short for December but are now long for January). Coffee traded opposite the U.S. Dollar, with strength early in the month and weakness when the Dollar bounced (we were long for December and remain long for January). Cocoa followed the same pattern as Coffee, but with more dramatic price swings (we were long for December and remain long for January). Cotton was generally quiet throughout the month, consolidating after recent gains (we were long for December and remain long for January). In summary, we are now long Sugar, Cotton, Coffee, and Cocoa for January.