Why would ASOS have a caution for Low Density Altitude?
Low density altitudes mean your engine generates more power, and your wings generate more lift. Everything is better with low density altitudes, right?


The potential danger in low density altitudes is that your engine generates more power than it can handle. Even without exceeding the maximum rated RPM and manifold pressure, you can exceed the rated power of an engine under low density altitude conditions. 

At low temperatures the air becomes denser. At standard sea level conditions air has a temperature of 15 degrees Celcius and a density of 1.225 kg per cubic meter. 
When the temperature is -30 degrees Celcius, the density increases to 1.452 kg per cubic meter. The equivalent altitude where this density is found under standard atmosphere conditions would be about -5900 ft. This is called the density altitude.

When air with these properties enters the combustion chamber of your engine and is combusted to the normal exhaust temperature it expands (increases in pressure) far more that air normally would, resulting in excessive power. 

This FAA paper on Winter Flying Tips says the following about the risks associated with low density altitudes:


  Do not overboost supercharged engines. This is easy to do because at very low density altitude, the engine "thinks" it is operating as much as 8,000 feet below sea level in certain situations. Care should be exercised in operating normally aspirated engines. Power output increases at about 1% for each ten degrees of temperature below that of standard air. At -40 degree F, an engine will develop 10 percent more than rated power even though RPM and MP limits are not exceeded.