What produces red artifacts? Photoshop breaks your image down into three primary colors, red, green and blue each having its own color channel. Your screen image projects all three channels simultaneously (Channel RGB). When you shoot underwater at depth without adequate strobe coverage, there is little information (or very noisy or blotchy information) in the red channel because of the absorption of the red end of the spectrum. In full version Photoshop you have a channels palette that will let you “look under the hood” and see what the red channel looks like. In Photoshop Elements you have to guess. Go to Enhance>Adjust Lighting>Levels and in the Channel drop down menu change the channel to red. If the red channel histogram is pushed up against the left side and slopes down toward the middle of the histogram, this is evidence of a “dead red” channel.
Adjustments like Smart Fix and AutoLevels assume that you have good information in all color channels and all the computer needs to do is rebalance them. When it tries to rebalance the dead red channel then it ends up producing the red spots or artifacts you are complaining of. Otherwise, smart fix or AutoLevels can work nicely on images shot with good strobe coverage or very shallow with good ambient light and stronger reds.
How do you fix the red artifacts? First, you can listen to Lisa. Forget AutoLevels or the levels adjustment in the lighting section in quick fix mode and go to Standard Edit. Select the levels adjustment dialogue box (Control-L or Enhance>Adjust Lighting>Levels). First change the channel selection in the drop down menu at top from RGB to red. Move the right (highlights) slider to the left until it touches the “tail” of your red channel histogram. Then fiddle with the middle (gamma) slider until you get the red spots and then back off until the red spots disappear. You then can go to the green and blue channels and adjust the sliders until you have color corrected your image to taste. Sometimes this method takes a couple of passes to get the adjustments the way you want them. If you are a more advanced PSE user then I suggest using Levels as an adjustment layer (get the drop down menu by clicking on the half black/half white circle in the Layers Palette) because it lets you go back and change your settings and has a built in mask if you want to “paint out” part of the adjustment.
If this does not produce satisfactory results then consider the Mandrake Method to attempt a repair to the red channel. A number of threads have discussed how to do this and I am happy to provide a link to an article I wrote which reviews this method. Because Mandrake involves a number of steps and layers it is really better suited to an action in full version photoshop if you have to adjust a lot of images, but I have heard from a number of PSE users who have used it with great results for the occasional image project in PSE.
I am speculating somewhat as to your problem. If you want to post an image then I am sure we can all help you work on it.
—Bob