I just started cycling a 10 gal nano setup recently and for about 1 week its water was absolutely clear. I added a piece of raw shrimp to it, and it got cloudy relatively quick once the ammonia started to rise. Prior to adding the shrimp I had barely a trace of ammonia. I used old dead rock that was super clean of any growth, and had been used on a wall display for over 20 years or so...absolutly no growth of any kind on that rock but I did use live sand. So now I am setting here with ammonia off the scale and nitrite levels way up there as well...both over 5. Tank stayed cloudy for about 2 weeks and now its starting to clear up quite a bit.....so yes the cloudyness is the bacteria and its good.