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Should my wheel bearing housing move like this?

Absolutely not. It looks like you might be missing the race either in the hub or on the spindle. Did you change those when you changed the bearings?
 
I've got both races in the hub. I didn't see any race on the spindle. Is there supposed to be 3 races altogether? I thought it was just the two that go in the hub?
 
Trailer axles are set up various ways. Some have a race that is pressed into the hub and the bearings inner race is integral to the bearing carrier and is pressed onto the spindle. Other bearing setups have a fully integrated bearing that has both the inner and outer race included and the whole bearing mechanism is pressed into the hub. You obviously have something wrong there. Are you absolutely sure you have the right size bearing? Did you make sure that the front and rear bearings (or races) were pressed into the hub completely until they hit the stopping ridge? Have you pulled the bearings and made sure it is in tact?
 
So I've noticed that I am NOT capable of spinning the nut tight enough to where I can't spin the hub.. it will NOT tighten anymore. Which tells me the threads on the spindle are probably messed up.
 
If you trailer your boat long distances be sure and install bearing buddies that way you can shoot some grease in the hubs so they dont pull in water when you launch the boat. Just take a grease gun with you if you submerge the hot hubs in cold water they cool quickly and create a vacuum pulling in water through the seals.
EDIT do both wheels at the same time that way you can use the other side to get the proper parts.
 
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I have the exact same bearings as the other side , and the other side is good. I pulled
the driver side off to see if I was missing anything. And Kim I have bearing buddies, I just hadn't put it back on when I took this video.
 
Just to inform y'all we got it fixed today! Where the outer bearing sits on the spindle had some grooves where the bearing had failed back in March, thus I couldn't tighten the nut up anymore We got some Emory cloth and went over it for a couple minutes and got the bearing to sit right again. It wasn't much. It wasn't off even a 1/10 of an inch. Got a new nut put on and filed the threads on the spindle back. Tightened her down and not any movement from the hub at all!
 
Did you back of 1/4 turn loose on the nut after getting it tight? The proper way is to jack the tire up and tighten the nut until the tire will not spin free. Loosen the nut 1/4 turn and then install the keeper and cotter pin. Then install the bearing buddy and pump it with grease until the grease pushes slightly out on the center of the bearing buddy.
 
Yes it spins freely after loosening a 1/4 turn. And then I put the keeper on the nut and the cotter pin and then the bearing buddy and pumped it full of grease.
 
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