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).

July 2010

Provided by: Victor Sperandeo of Alpha Financial Technologies

Energy – The CTI© was flat the sector for June. Crude Oil and its products traded mixed throughout the month, as questions about demand and the global economy were offset by tensions in the Mideast, weather concerns, and the potential for less drilling after the BP disaster. Natural Gas finished the month slightly higher, putting together a decent rally on hurricane fears before supply data pushed prices back down. We believe GDP, 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 July.

Grains – The CTI© was short the sector for June. Grains traded lower throughout the month, as a stronger U.S. dollar and weakening global demand kept pressure on prices. Soybeans demand remained strong and was the strongest of the group. However, the USDA reports released on the last day of the month sent Corn and Wheat sharply higher due to less Corn acreage and lower supplies. We believe the sector will remain sensitive to any additional acreage or planting news, as well as weather, the direction of oil, military conflict, export levels, and global GDP. The sector remains short for July.

Industrial Metals – The CTI© was short Copper for June. Copper saw heavy selling pressure early in the month, following equities lower. The market then rebounded, until the very end of June when Chinese economic growth was revised downward. We believe global economic growth, any news on Chinese demand, additional European news, and the state of the U.S. housing market remain the major factors in this market. The sector remains short for July.

Livestock – The CTI© was short Livestock for June. Both Hogs and Cattle were close to unchanged for the month. Hogs were quite volatile, as fund positioning and export news resulted in periods of sharp selling followed by strong buying. By comparison, the Cattle market was generally quiet. We believe feed prices, export demand, and global economic growth will be the main influences on the sector. The sector remains short for July.

Precious Metals – The CTI© was long Precious Metals for June. Gold and Silver finished the month slightly higher, after trading in choppy action throughout June. Gold remains a safe haven, and a diversification from other asset classes. We believe additional problems facing the Euro, potential conflict in Korea or Iran, and any changes in interest rates are the major factors influencing the Precious Metals markets. The sector remains long for July.

Softs – Soft trading was volatile in June. Sugar was slightly higher for the month, as demand news was rather uneventful, but liquidity was terrible. Coffee was sharply higher, as crop issues combined with catching the market heavily short. As a result, Coffee rallied over 20% for June. Cocoa traded in thin, choppy action as a lack of material news led to funds and speculators pushing against each other. Cotton sold off sharply during the first week of the month on poor demand news, then rallied all the way back to new highs before fund selling pushed prices back down towards the end of the month. As a result, we are now long Coffee but short Cocoa, Cotton, and Sugar for July.