Arranging a layer that won't go behind another

[QueeGeeBo]

I have created an ellipse with a stroke and no fill with an opacity of 35. I want it to be coming out from behind another image (new layer, gif). I can't seem to get it behind that image. I've tried arranging the layers a million times.
I know it can be done - I copied them over from another file that it works in just fine. I can arrange the ellipse to go underneath the gif and it works.
What's going on here? The gif is at 100%.
Thanks so much!

 

[QueeGeeBo]

Nevermind I figured it out. I had a corrupt Illustrator app and it wouldn't show the 'layers' palette. When I opened it on another computer, I saw the problem!