Your child color rainbows all the time because she is thinking happy thoughts.

Yes it is.

Between the ages 5-8 or 9 they have a tendency to make their pictures extremely colorful.  They are learning to create an effect that looks mosaic like and it also allows them to experiment with colors.

As a child learns about colors they will want to use them. As a preschool teacher 99% of the pictures I see are done in rainbow colors. If you are truly concerned, try asking your child what the color of things are. If they can tell you the sky is blue, trees are green, etc. then most likely there is not a problem. If they are seeing the sky as black, grey, blue, green they may have a problem with various forms of colorblindness. That is a very unlikely situation, and most of the time they are just expressing their desire for things to be bright and colorful.