While still in the accumulation phase I am in 100% equities for the simple fact that long term gains are all I care about right now. The ebb and flow of the market doesn't really factor in since I'm dumping money in on a consistent basis.
During the withdrawal phase, as already mentioned by another poster, a more balanced portfolio minimizes the up and down swings of the market via their contradictory behaviors to market triggers. Thus, while your portfolio trend line won't be as vertical overtime, the difference between the trend line and your actual portfolio value at any given time will be closer. So, when you have to sell, the dip you may be selling in won't be as egregious.
There has been some talk of holding some X amount of cash in reserves to act as a buffer during down markets. While you can sense how the market is doing based off of the larger economic picture, this strategy practically amounts to market timing. You may save yourself some heartache from having to sell in a dip, but you also may simply be losing out on earning potential if the market does well. I see it as one of those times where you have to decide based on what makes you sleep better at night.
As far as selling monthly or yearly, that's mostly academic (and is basically the same as keeping some portion of your portfolio in cash if you think about it). The good news is the 4% theory accounts for the inevitability that you'll be selling some of your stash in a downturn, so there's that.
In the end, just keep yourself educated on how the general market is doing and you'll probably be a tad safer than blindly selling at a regimented timeline. The 4% rule assumes that you'll be selling consistently. If it's obviously a bad time to sell, and you cinch your belt instead and wait it out, you'll be providing yourself with even more of a safety buffer.