With your marquee tool still selected, use the arrow keys to move the selection down as shown. This will deselect an area of the circle selection and leave you with a selection like I have on the left. Now reverse step 4. Move the selection up using the arrow keys. Make sure you move it up the same amount that you moved it down.
Lets make the button highlight now.
To do this you need to hold down the control key and click on the first circle layer. Then basically repeat steps 3-6 in reverse. Move selection up using the up arrow key. Move selection back down the same amount you moved it up. Now go to your channels, and create a new channel and fill it with white.