Disable Touch Input Tracking Bubble on 4.4.2 CM 11
Found it. I remembered installing a beta app from Cyanogenmod called Screencast which can be used to record the screen if you have a CM 11 ROM. When you start recording there is an option in the notification bar to Show Touches. I had enabled this when playing with the Screencast app, and it continues to track touch input even after you stop the recording. Disabling the Show Touches option fixed my issue.