(Layer 1) Add the sky
(Layer 2) Add the sky again and use 'Image | Flip' to match up with bottom of first sky. While still in selection mode (dancing ants), use the mouse or hold down the 'shift key' and use the arrow keys to align with step (1). Once aligned, use the 'smudge' tool to join them to create the distant shoreline
(Layer 3) Add the water and set opacity so step (2) shows through
(Layer 4) Add the rainbow and set desired opacity
(Layer 5) Add the shoreline, lighthouse, seagulls, and whatever you like. Add each as individual layer so you can move them individually.

Final step, once you like the result, select 'Layers | Merge' and save in the format you desire. If you want to work with it again, do not merge and save in *.psp format. This will preserve all the layers for future manipulation.

CONGRATULATIONS!! You are a 'tube painter'!
Sky and Water Tubes from Tubaholics Anonymous
Rainbow Tube from Hoods PSP Tubes Downloads
Sand, Lighthouse and Seagulls from The Page of Blues