I'm having problems with this quest. I started it. Talked to the 3 suspects. Then the guard wasn't there anymore and it just has an arrow pointing to the ground. Not sure what i did.. Need help please.

One of the more bug ridden quests. Check the UESP or WIKI pages for work arounds.

Does it say to talk to the guard or does it say to follow the blood trail on the ground?

If you're on PC or XboxOne, USLEEP might be able to sort it out. Not sure it works out every kink though since that quest is one of buggiest in the game.