Edit in Photoshop greyed out, not available in LR 4.2

When I right click a photo in LR 4.2, I cannot get the option to edit in Photoshop Elements 11. The option to open in Photoshop is greyed out. What do I need to do to fix this? I have the Preferences in the Eternal Editing tab set to edit as a PSD, sRGB, 8 bit.
What else do I do?

Below is a screenshot of my Lightroom preferences panel.
Lightroom v4.3
Photoshop Elements Editor 10.0
Mac OS X 10.7.5
I'll try setting up photoshop elements as the  secondary editor but shouldn't it  work as the primary editor?

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