That's just wrong - the water-filled balloon - I've never heard of that, and it just sounds like a bad idea. What you CAN try is a spray bottle, and spritz him with water, to distract him. But a better idea is as soon as he starts to react to another dog, tug the leash a bit and get him to sit, then do "down" or "paw" or whatever other commands he knows, and only when he is calm again let him approach the other dog.