If you are measuring Free Chlorine (FC) then the pool is sanitary though your overnight chlorine drop indicates the chlorine is still killing off or oxidizing algae or organics. Though it's not normally recommended, it is still safe to use the pool while shocking because at the level you are shocking with CYA in the water, the amount of active chlorine (hypochlorous acid) is roughly equivalent to a pool with around 0.6-1.2 ppm FC and no CYA which is less than most commercial/public indoor pools that usually do not use CYA.

So the higher chlorine levels will oxidize your swimsuits, skin and hair faster, but not worse than some indoor pools. You want to avoid drinking lots of pool water as it is the FC level that matters in that case, but that's not something you would normally do anyway. My wife experiences this difference every year when she swims in an indoor community center pool over the winter where her swimsuits degrade (elasticity gets shot) after just one winter season of use and her skin is flakier and hair frizzier. During the summer in our own outdoor pool with CYA, none of these problems occur and the same types of suits last for years with no sign of wear. The difference is that the active chlorine level in the indoor pool with 1-2 ppm FC and no CYA is around 10-20 times higher than in our outdoor pool with an FC that is roughly 10% of the CYA level on average.

Richard