Mac PSE 6: the smudge tool adding a rainbow

I recently bought the new Photoshop Elements for Mac, and so far it's doing fine
with no glitches like in version 4.

But for some reason, when I use the smudge tool, it adds a slightly transparent
rainbow effect to the smudging. I haven't touched the settings, it's all on
Normal and the opacity is at 100%, but as I smudge, the rainbow gets more
contrasted. I don't want the rainbow to be there at all. It varies from a full
rainbow to just green & yellow, etc.

How do I fix this? I use a Wacom Bamboo Fun tablet, and the settings for that is
on air-brush and 100% hardness. I've been using Photoshop for 4 years, and a
Wacom tablet for 3 years, and this is the first time the rainbow has showed
itself.