I see. Looks like it's really not available in Elements. I googled it and found a plugin which adds the tool to do it. You need to donate $10 though (EDIT: I re-read the description and found out the donation is not mandatory). And it's for Photoshop Elements 7. Here it is
Hidden Power Free Tools for Elements 7 (PC & Mac)
You can however, use Threshold adjusment layer to get the same end result. See this tutorial
Photoshop Elements Shadows or Highlights Selection
Just in case it's not very clear, the Select Highlights tool (or Threshold tool) will just make a selection of the lightest part of the active layer. You still need to mask the layer using the selection, then it will 'blend' with the layers below it. So it's not exactly a Layer Blending option and it's not automatic in a sense.
Hope it helps!