。
I sit cross-legged in the spot Aoi pointed to.
Literal
I [topic-は] Aoi [gen-の] pointed place [at-に] cross-legged-seat sit.
葵の指さした場所 is a relative clause: 'the place (that) Aoi pointed to.' Note the internal subject is marked with の here, not が — Japanese allows either in relative clauses, with の being slightly more literary or emphatic. 胡坐 ('cross-legged sitting,' literally 'Hu [foreigner] seat') is the formal name for the cross-legged posture with legs folded in front; the collocation 胡坐をかく uses かく ('to scratch, to make, to do') idiomatically. 胡坐をかく contrasts with 正座 ('formal kneeling') and 座る ('to sit' generically).