Proof.
Assume K \in D(\mathcal{A}) is a compact object. Represent K by a complex K^\bullet and consider the map
K^\bullet \longrightarrow \bigoplus \nolimits _{n \geq 0} \tau _{\geq n} K^\bullet
where we have used the canonical truncations, see Homology, Section 12.15. This makes sense as in each degree the direct sum on the right is finite. By assumption this map factors through a finite direct sum. We conclude that K \to \tau _{\geq n} K is zero for at least one n, i.e., K is in D^{-}(R).
We may represent K by a bounded above complex K^\bullet each of whose terms is a direct sum of objects from S, see Derived Categories, Lemma 13.15.4. Note that we have
K^\bullet = \bigcup \nolimits _{n \leq 0} \sigma _{\geq n}K^\bullet
where we have used the stupid truncations, see Homology, Section 12.15. Hence by Derived Categories, Lemmas 13.33.7 and 13.33.9 we see that 1 : K^\bullet \to K^\bullet factors through \sigma _{\geq n}K^\bullet \to K^\bullet in D(R). Thus we see that 1 : K^\bullet \to K^\bullet factors as
K^\bullet \xrightarrow {\varphi } L^\bullet \xrightarrow {\psi } K^\bullet
in D(\mathcal{A}) for some complex L^\bullet which is bounded and whose terms are direct sums of elements of S. Say L^ i is zero for i \not\in [a, b]. Let c be the largest integer \leq b + 1 such that L^ i a finite direct sum of elements of S for i < c. Claim: if c < b + 1, then we can modify L^\bullet to increase c. By induction this claim will show we have a factorization of 1_ K as
K \xrightarrow {\varphi } L \xrightarrow {\psi } K
in D(\mathcal{A}) where L can be represented by a finite complex of finite direct sums of elements of S. Note that e = \varphi \circ \psi \in \text{End}_{D(\mathcal{A})}(L) is an idempotent. By Derived Categories, Lemma 13.4.14 we see that L = \mathop{\mathrm{Ker}}(e) \oplus \mathop{\mathrm{Ker}}(1 - e). The map \varphi : K \to L induces an isomorphism with \mathop{\mathrm{Ker}}(1 - e) in D(R) and we conclude.
Proof of the claim. Write L^ c = \bigoplus _{\lambda \in \Lambda } E_\lambda . Since L^{c - 1} is a finite direct sum of elements of S we can by assumption (2) find a finite subset \Lambda ' \subset \Lambda such that L^{c - 1} \to L^ c factors through \bigoplus _{\lambda \in \Lambda '} E_\lambda \subset L^ c. Consider the map of complexes
\pi : L^\bullet \longrightarrow (\bigoplus \nolimits _{\lambda \in \Lambda \setminus \Lambda '} E_\lambda )[-i]
given by the projection onto the factors corresponding to \Lambda \setminus \Lambda ' in degree i. By our assumption on K we see that, after possibly replacing \Lambda ' by a larger finite subset, we may assume that \pi \circ \varphi = 0 in D(\mathcal{A}). Let (L')^\bullet \subset L^\bullet be the kernel of \pi . Since \pi is surjective we get a short exact sequence of complexes, which gives a distinguished triangle in D(\mathcal{A}) (see Derived Categories, Lemma 13.12.1). Since \mathop{\mathrm{Hom}}\nolimits _{D(\mathcal{A})}(K, -) is homological (see Derived Categories, Lemma 13.4.2) and \pi \circ \varphi = 0, we can find a morphism \varphi ' : K^\bullet \to (L')^\bullet in D(\mathcal{A}) whose composition with (L')^\bullet \to L^\bullet gives \varphi . Setting \psi ' equal to the composition of \psi with (L')^\bullet \to L^\bullet we obtain a new factorization. Since (L')^\bullet agrees with L^\bullet except in degree c and since (L')^ c = \bigoplus _{\lambda \in \Lambda '} E_\lambda the claim is proved.
\square
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