Premiere Elements 7: track matte key video effect does not work?

I want to use the track matte key video effect to fade out some cropped video clips. So I did a test:
first track: video clip
second track: PNG file, black with white circle
third track: video clip with FX with second track (here: Video 5) and luminance
As you can see in the picture the small preview pic above the effects shows the effect like I expected: a circle with the content of the third, lowest, clip. But the large video preview shows the first clip.
What did I do wrong?
I tested other settings and track orders. No efforts.

Bill, thanks again for your help! Good tutorial. That's what I need in principle! My try was a bit more complicated ...
But I can't help. The white area stays (see screenshot top left corner). Only some of the small blurred area around the shape shines through as I could see playing around without blurring the video clip.
I used:
title with white (it is 100% white) shape and blur effect above
video clip with track matte effect and matte alpha on the title track, reversed (blur effect on whole clip like in the tutorial)
Rendering and export does not change anything.
I'm feeling a bit stupid.

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Premiere Elements 7: track matte key video effect does not work?

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