Your media doesn't match the project settings or it needs to be rendered.
What version of Premiere Elements?
This is for Premiere Pro, but some of it applies:
But if your video looks like it's a negative, that would be unrelated to rendering.
It likely indicates that you need to update your graphics cards driver (directly from the nVidia or ATI web site).
But it also could be an issue with your video. What model of camcorder is your video coming from and what format and resolution is it?