Lantern Battleships

Started out by turning the src image into balloons, then placed the image of the battleship on top of them. Changed the colors to make the image look more yellowish, refined the shadows.

• 1: http://morguefile.com/archive/?display=218817&&sid=160f539f99ffb826b5f0ed8d02cbc79a

Added the background clouds and changed the color of them too. Cut/pasted a small portion of the bg cloud on top of the battleship to make it look like it is gliding through the clouds.

• 1: http://morguefile.com/archive/?display=229284&

Added explosions, i made these by selecting some of the bg clouds with the Elliptical marquee tool, cut/paste into a new layer, used the liquify tool to make it look a bit more "explosion" like. Fixed the coloring using Color balance, I used the following settings:
Shadows: +49 -20 -91
Midtones: +28 +43 +100
Highlights: +4 +5 +1

Created a new layer under the explosion layer and used the circle tool (foreground color set to white) to create a sort of background effect to accentuate the explosion. Used gaussian blur to soften the edges of the circle and then set it to Overlay with 85% opacity.

Added spotlights by using the polygonal lasso tool and creating a long triangle shape. Filled it with white color, gaussian blur to soften edges, set the layer to overlay with 85% opacity.

Duplicated the battleship (Select the layer and hold ALT while click-dragging with the mouse). Gaussian blurred the background battleships.

Made a new explosion on one of the back ships, set the coloring to a fiery yellow/red.

On top of all the layers I created a new layer that would act as an dark overlay.
Started out by rendering clouds, then inverting them by rendering difference clouds. Set the right color using Hue/saturation (i used yellow), then changed the levels to make it darker. Set the layer as overlay with 60% opacity. Voila!