Creating Smoke

 

1 - Create some Shapes: I created some random shapes.

2 - Apply a Gaussian blur on each shape

3 - Using the liquify filter

4 - Positioning the shapes

5 - Adding some colors

Add a background color on the layer of the shape, otherwise the Hue/Saturation won't work

6 - Creating a cloud behind the smoke

Set a feather with a high value, like 40 to 80, and after that apply the hue/saturation on the cloud too

7 - Adding a gradient to create an atmosphere

The gradient will give a atmosphere and more depth to the image

Final Result