Why do you people need a diagram? Are you having a problem visualizing a big far away object being blocked from sight by a closer smaller object? Hold your thumb up and close one eye. You will simply be amazed at what your little thumb can block from your field of view. Mine can block my neighbors entire car.
I feel like I am teaching a perspective class to a bunch of 1st graders. 
Yes Jroa, but the swells are below your eye level. Try putting your thumb on the floor and seeing what you can cover. Or better yet, set a box down below eye level. Does it cover up your neighbors' car then? No! It just doesn't work for the same reason I can still see my neighbors' trees even though there's a 5 foot fence in the way
When observing the ocean from a beach, there are swells all the way up to eye level.
Ships disappear from the bottom up because of perspective. Small swells in the ocean that are relatively close block your view of part of a ship that is much farther, and therefore smaller.
Small swells, remember?
Your post, quoted here was immediately followed by a clarification of "small".
Not if the small swells are lower than your eye level. Swells (below eye level or not) don't stay at the same place, either, unlike the horizon.
If you disagree, can you provide a sketch showing what it is you're trying to say? You'll also need to explain why the horizon, if it's caused by these things, doesn't move.
Are the swells at sea going to adjust for your eye level? How would they know? What if you're standing next to someone taller or shorter?
Also, there was no requirement for the observer to be standing on a beach.
Did you discover this flaw with your argument when you tried to draw the illustration of perspective? That was the idea.
Still nothing on why the distant horizon doesn't move, either.
Please, try harder to troll. 
You're a moderator on this forum and you're
requesting people to troll? We know you engage in it yourself - it's about your only form of argument - but, really?
No wonder attempts at discussion are such a disaster here.